Establishment Of China’s Financial Crisis Early Warning Model And Empirical Research

As the degree of liberalization of the global economic and financial deepening inrecent years, the financial crisis around the world frequently.1997-1999, outbreak of theAsian financial crisis, in2007, produced a sub-prime crisis then caused the global financialtsunami, the European debt crisis in2009. The financial crisis has caused tremendous harmto the economy as a whole, as well as social. With China’s financial system and globalfinancial integration is becoming more and more closely, the financial system of China isvulnerable to the impact of financial crisis around the world. Therefore, Building afinancial crisis early-warning model in accordance with China’s national conditions play avery important role in China’s financial security. This paper makes comprehensive use offuzzy mathematics and principal component analysis,then creatively use gray systemtheory to establish a financial crisis early-warning model.Taking into account the current situation of China’s domestic financial developmenton the basis of the research in literature, this paper selected12indicators to establish China’sfinancial crisis early warning indicator system from three aspects of monetary security,bank security and external security.Then did one-way Granger test between12indicatorsand the financial crisis, the test results was significant.When established the early-warning indicators, this article used the theory of fuzzymathematics and principal component analysis to research the situation of China’s financialdevelopment from1998to2011, then built the early warning model of fuzzycomprehensive evaluation.Take model computing results with reference to internationalsecurity value standards,found that our financial system is in the basic safety condition bymost of14years, only in2009a crisis situation occurred,and the alarm alerted. Referenceto the true state of nearly14years of financial development in China,taking the model offuzzy comprehensive evaluation to establish early warning and the analysis resultsconform to the facts.Using the results by analyzing fuzzy comprehensive evaluation of early warningmodels as a data sequence.Then analyze the sequence by the gray systemtheory,establishing gray system forecasting model to predict China’s financial systemoperating conditions in2012and2013, the comprehensive evaluation value are45.92and47.94. Posteriori value is also consistent with the requirements of the gray model, theforecast result is high reliability. The results showed that China’s financial development isstability in2012and2013, There is no significant financial crisis. However, these two results are close to the maximum range of basic security, China should continue tostrengthen prevention and inprove monitoring of early warning indicators of financial,andthus prevent a financial crisis due to chance factors.Finally, according to the results of the present model combined with China’s financialdevelopment status to explain the specific values of each indicator and make relevantrecommendations to build our financial early warning system based on the contents of thispaper.