Measurement Of China’s Financial Cycle And Study On Regional Convergence Of Financial Cycles

The 2008 financial crisis caused a recession of the world economy. Its destructiveness and infectious ness is so violent that people begin to pay attention to the role finance takes in modern economy and study the relations hip between these two subjects. These studies no longer treat finance as the dependency of the economy and begin to focus on the fluctuation laws and stylized facts of the finance. They aim to provide advises for the government to formulate more reasonable monetary policies and supervisory mechanism.According to the definition of financial cycle Bario put forward, this paper chooses four variables to form the financial cycle, the credit, the credit to GDP, the price of real estate and the stock price index. There are two methods this paper use to curve the financial cycle, the band filter and the turning-point analysis. It firstly curves the cycles of these four variables separately and extract their common parts as the financial cycle. This paper studies two kinds of financial cycles, the short cycle which lasts about 1 to 8 years and the medium cycle which lasts about 8 to 20 years. To compare financial cycles with different time length, we can get a more clear understanding. Besides China’s mainland, it also extracts the financial cycles of nine countries which bcate at East and Southeast Asia, including Japan, South Korea, Hong Kong of China, Taiwan of China, Singapore, Indonesia, Malaysia, Thailand and Philippines. These countries are close to each other geographically and their economic and financial data is available. And then we calculate the concordance indexes of their financial cycles and evaluate the regional convergence of the East and Southeast Asia. Finally, the paper analyses factors which influence financial cycle and the reason why financial cycles of different countries converge in the same region.This paper consists of five chapters. The first chapter introduces background, meaning, methods, creativity and shortcomings of the study. The second chapter is the literature review summarizing the studies researching on financial cycle. The third chapter introduces the band filter and the turning-point analysis method and shows the financial cycles of ten countries in charts and graphs. The fourth chapter analyses the problem weather financial cycles of countries in the same region converge, taking the East and Southeast Asia as an example. The last chapter summarizes the conclusions of the study and provides some policy proposals.