Association Of The Credit Cycle And Economic Cycle: A Comparative Study Of China And Japan

The great depression, the Southeast Asian financial crisis and the global financialcrisis in2008have brought indelible and serious consequences for the relevanteconomies. The influence is deepened by the pro-cyclical nature of the financialsystem. Before the arrival of the financial crisis, it maybe cover up problems andresult in false prosperity. After the financial crisis it would shrink the size of creditand increase the degree of economic recession. This pro-cyclicality credit has arousedthe attention of scholars. Domestic and foreign scholars analyze and interpret thisphenomenon from different angles, and have abundant research results. Take Japanand China as examples, this article will study the relationship between the credit cycleand economic cycle and interaction mechanism. Furthermore, this paper choose avariety of empirical methods to conduct a detailed analysis in order to ensure therobustness of the conclusions and accuracy, and found the importance and necessityof financial regulatory reform by Japan and China comparison.At first, on the theoretical basis of the credit cycle, economic cycle and therelationship, this article found mechanism of financial supervision could inhibiteffectively credit pro-cyclical phenomenon. Secondly, this article introduces H-Pfiltering and BBQ algorithm from the periodic measurement aspect, and from thesynchronization point of view on explains the Pearson correlation coefficient, VARmodel based on the time domain method and spectrum analysis method based onfrequency. Then, this article uses the five methods to analyze and found that from1990to2013period the Japan economy has around five cycles, and Japan credit from1992to2013has around four cycles. In the whole period Japan credit pro-cyclical orcounter cyclical is not obvious, but there are the stages of credit pro-cyclical andcounter cyclical phenomenon in Japan. Perhaps the most important reason is effectivereform of financial regulation system in japan. Research on the China found that from 1992to2013China economy has about four cycles, and there are about two and ahalf credit cycle from2000to2013in China. During this period there is creditpro-cyclical phenomenon in China, and the credit cycle leads economic cycle aboutthree quarters.Finally, the article puts forward the policy recommendations, China shouldstrengthen the coordination mechanism of financial supervision and macro economy,emphasis on counter cyclical regulation, determine the core leadership in a bank andthree association, improve relevant laws and regulations of financial supervision,protect the legitimate rights and interests of financial consumers, strengthen thecoordination of domestic regulation and the international supervision, improve themechanism of monetary policy and the risk management ability of commercial banks.