Existence Research On The International Contagion Effect Of Liquidity Black Holes In The Subprime Crisis

In2007, the subprime crisis erupted in the United States, and quickly evolvedinto a global financial crisis. China does not have the heaviest loss in the subprimecrisis, but as the Chinese financial market is gradually open to outside, theinternational financial crisis will influences Chinese market in more and more bigscope, China would be impossible an outsider of the financial crisis, therefore, it is avery urgent task for our country to prevent the happening of the financial crisiseffectively.Through extensive research to the financial crisis, foreign scholars have foundthe phenomenon of liquidity black hole in many recent financial crises, it is one of theimportant performances of the financial crises. Liquidity black hole is a conceptproposed by Avinash d. Persaud, referring to the liquidity of the market has a suddenloss in a short period of time. Liquidity black hole can also spread to other countriesthrough various channels, the influences are very big for the global economy system.Determining the existence of liquidity black hole and liquidity black holeinternational contagion effects, seeking liquidity black hole and the cause of theinfection, has important theoretical and practical significances to improve theimmunity of China’s financial system and is the inevitable requirement of buildingfinancial powers.Considering various kinds of influence factors comprehensively, this paper setsup the existence standard of liquidity black hole on and liquidity black hole contagioneffects, probes into the appearance of liquidity black hole and the cause of theinfection to build our country’s financial system perfectly, improve the ability to copewith the liquidity black hole, and promote the healthy and sustainable development ofeconomy in our country.Firstly, this paper combs the theory origin of liquidity black hole and financialcrisis contagion, and then studies the connotation and characteristics of liquidity blackhole, financial crisis contagion effect, the international transmission channel from thetwo perspective of micro and macro liquidity.Secondly, the paper establishes the decision criteria for determining the existenceof liquidity black hole, constructs the testing model of the existence of liquidity blackhole, makes preliminary descriptive analysis to the American stock market liquiditylevel, and applies the vector autoregressive model to judge the liquidity black holes inthe subprime mortgage crisis.Thirdly, the paper tests the existence of liquidity black hole in the subprime crisis,on the basis of that, and selects Germany, France, Britain, Japan and China asrepresentatives to examine the existence of liquidity black hole internationalcontagion effect inspection. Establishing decision criteria of determining the existenceof liquidity black hole international contagion effects, making the daily stock index closing price in six representative countries as the index data, building the model ofinspecting existence of liquidity black hole international contagion effects, using thevector auto regression model and impulse response analysis of inspecting the liquidityblack hole international contagion effect, the paper proves that the liquidity black holewhich exists in the U.S. subprime crisis is internationally contagious, and China hasbecome one of the victims.Finally, this paper analyses deeply the infectious cause of liquidity black hole,points out that the assimilation of financial institutions risk management measures,financial institutions, assimilation external regulation, information sources,assimilation of market expectations and reading simplification, and designs thestrategy in our country to manage liquidity black hole and transmission: encouragingthe market players to establish a personalized risk management system; establishingall-sides diversification of risk regulatory system for regulators; preventing marketexpectations to be similar; promoting financial openness and liberalization; graduallysolving the problem of China’s economic structure, which is the fundamentalguarantee from external shocks.The paper mainly discusses innovative perspectives in the following aspects:1. The paper builds the standard for judging the liquidity black hole and the stockmarket to measure level of liquidity, making the subprime crisis in the United Statesas the background, carries on the inspection to the existence of liquidity black hole,enriches the theory of empirical liquidity black hole research.2. The paper carries on the inspection of the existence of liquidity black holecontagion effect in subprime mortgage crisis using the vector auto regression model,analyzes the transmission path of the liquidity black hole. Then the paper makesresearch with daily closing prices of six representative countries stock index asvariables, and improves the scientific nature and credibility of the findings.