China's Financial Development, Financial Structure And Output Stability

This paper mainly focuses on the relationship of China's financial development, financial structure and stability, and tries to construct a framework to benefit the Macro-Control on the economic development for Chinese government, which analyzed by addressing the following four problems. (1) Since the reform and opening up of China's economy, it has suffered the impact of trade shocks and inflation problems a lot, but why does China achieve such a long-term stable growth? There should be a mechanism playing a role in shock absorber, and which the mechanism? Beck and Luo have both paid attention to the impact of financial development governance role, but got conflicting views, whose view is closer to China's reality? (2) Financial development is produced and grown up in the economic structure macro-environment, and then will the changes in economic structure affect its impact on various types of governance role? What is Specific impact? (3) Financial development is endogenous from the financial structure, and what is the role of financial structure in governing both kinds of impacts? (4) In view of the complex relationship between economic and financial structures, can we extract a major impact on law? Is the law strongly supported by the real data?The first kind of questions in Chapter 2, we answered them from two angles, theoretical and empirical, the answer is as follows: Since the reform and opening up China's economy suffered the impact of trade shocks and inflation problems a lot, such a country constantly affected by shocks, has been able to achieve rapid and stable economic growth, because China's financial development could reduce the trade shocks in a certain extent, it is this mechanism that plays the role of shock absorber. The results coincide with Beck's cross-country study on the impact of financial development on the trade shock. The second class of problems, financial development is endogenous from the environment under the economic structure; so the economic structure changes should affect the impact of financial development on the governance role of various types of shocks, while the second part of Chapter 2 also proved this in an empirical way. And also found that the denationalization of the economic structure tends to help enhance the impact of financial development on trade shocks reduction effect. On the third kind of problem, Chapter 3 of this paper is to research the financial structure's role in governing both types of shocks, our empirical results show that the financial structure of the non-nationalization help reduce the inflationary impact of shocks on output stabilization, but it will t increases the adverse effects of trade shocks on output stabilization. The fourth problem in Chapter 4, for the complex and close relationship between financial structure and economic structure above,referring to Lin's financial structure optimization theory, this part proposes a "structural matching hypothesis", that is, if the financial structure matches the economic structure, which will be more conducive to economic stability, on the contrary, it is not conducive to economic stability. To prove our hypothesis, this paper uses the Chinese provincial panel data, combined with Driscoll and Kraay variable regression methods and tools to do rigorous estimation, basically, the empirical results support our hypothesis.In addition, we also found several valuable conclusions, such as: (1) Chinese local government intervention in the economy is not conducive to economic stability. (2) the larger of economies scale in a region, the more conducive to its stability. (3) Continuing the open policy is the right choice.