Research On Spillover Effect Of Finance Under US Subprime Crisis

In 2007, U.S. housing market bubble burst, expansion of the credit derivatives halted suddenly which developed under the background of long-term excess liquidity, and U.S. subprime mortgage crisis happened. Then, the crisis spread at an unexpected speed among global financial markets, and evaluated from the credit crisis into comprehensive liquidity crisis. Financial institutions suffered huge losses, the main stock market continuous slump, the global economy suffer severe impact. In the wake of the financial crisis, with the implementation of the massive economic stimulus policies, many countries governments budget deficits and public debt has soared, sovereign state credit was downgraded, bond market collapsed, national debt interest rates rise, the subprime crisis degree further deepen, and eventually change into sovereign debt crisis, and until now still spread.The subprime mortgage crisis spreads and upgrade process is typical performance of the financial crisis international transmission. Under the background of high financialization, international flow of capital plays a key role in the transmission of subprime mortgage crisis. International capital shift between the developed banks and capital market in different countries promote the transfer of the spread of the mortgage crisis, and external performance is the co-movement of same market between different countries. Based on this situation, the present study of financial spillover effect of the subprime crisis exploring the subprime crisis transmission path has important significance.This paper firstly describes the basic theory of financial spillover effect of financial crisis, then illustrate new features of the current financial crisis international transmission. Secondly, selecting bank market, the stock market and sovereign bond market of major economies as the research object, using bank credit index, stock index, the Treasury yield index, through the VAR, CoVaR etc econometric methods to empirically test spillover effect between different international bank and capital market. The results of the study show that the correlation of international bank loan specified amount declined obviously during the crisis than before. In addition, the crisis and the stock market has obviously financial spillover effect, in which the United States, Britain, Japan and other developed countries in crisis play an important role during international transmission. What's more, the sovereignty of the market has formed Mesh conduction mode in which Greek is the center, the other four pigs are in the edge of network, though which sovereign debt crisis will continue to spread to the UK, Germany and other samples countries. Based on the empirical results with theoretical analysis, this paper suggests that China should improve the financial regulation in international cooperation level and focus on the transformation of economic structure to radically reduce the possibility of crisis happening and successfully manage the crisis.