| The Pro-cyclicality embedded in the process of credit expansion negativelyaffects economy development and banks’ future management. It is widely acceptedthat the commercial bank’ loan supply and macroeconomics are correlative interplay.Commercial banks would distribute more loans on the condition a prosperouseconomy, otherwise, it would distribute less amount of credit. Meanwhile, the creditalso has a significant influence on economy. To be specific, economy can be fullyboosted on the basis of enough capital support, which is supported by banks.Whileconcerning the existence of credit crunch in commercial banking system, less credit isused to support manufacturing, which may cause a economic slump.The analysis of the causes and the negative influence of credit Pro-cyclicality ispresented on the basis of financial accelerator theory. According to the analysis,asymmetric information is the fundamental cause of credit Pro-cyclicality and inaddition to that herd behavior and and overconfidence are also vital factors.Moreover, the global game is applied in the research to analyze the causes andsolutions of Pro-cyclicality. First, the paper has analyzed the economic cycle andcredit cycle, based on datas of GDP figure, GDP growth rate and loan balance，froml978to2013. The causes of the cycle are showed as well; Secondly, the developmentof commercial banks’ loan supply is explained and a comparison is made on creditexpansion and economic development. VAR model is established to examine therelationship between credit balance increase rate and GDP growth rate, usingquarterly data between the first season in1998and the last in2013. Accordingly,twoconclusions are drawn that the Granger causality relationship is given and CreditPro-cyclicality is relatively weak.An example is applied to illustrated the main causesof the weak Pro-cyclicality, including government’s significant role in formulatingmacroeconomic and commercial banks’ excessively attention on interest spreads ofdeposit and loan. Therefore, it is pointed that credit Pro-cyclicality is becomingincreasingly prominent and more research on credit pro-cyclicality is needed for thesake of ensuring the sustainable development of commercial banks and economicgrowth.It is concluded that in order to help commercial banks make effective andaccurate credit expansion policy, banking system’s improvement management, strengthening macroeconomic control and expanding financing channels are becomingmatters of urgent concern. |
