Financial Variables On The Adjustment And Control Of Economic Growth

Financial market is the core of economic system in a country, the changeof financial variables can affect directly national economy. In recent years,central bank of our country monitor monetary supply; at the same time,exchange rate system reforms successfully and the process of interest ratesliberalization speeds continually. Monetary supply、exchange rate and interestrate have a significant role on the adjustment of economic growth. On the otherhand, governments pay attention to monetary supply、exchange rate andinterest rate in financial crisis. The financial variables also have a positiveeffect on the control of financial risk. So, Putting the three financial variablestogether, analyze their dynamic behavior、research adjustive mechanism ofeconomic growth and mechanism of financial risk control is helpful forperfecting financial market、improving the level of monetary policy.This paper consists of several parts. The introduction details the researchbackground、research purpose、meanings of study、the idea of writing and theframework of this text, gives a systemic literature review, points out theinnovations and deficiencies of this paper. Chapter2reviews some Macrofinancial theory. First segment introduces covered interest rate parity, pointsout the relationship between exchange rate and interest rate. Second segmentintroduces the assets market approach to the exchange rate, points out thepolicy implications of this theory. Chapter3analyzes the dynamic mechanismof financial variables. First, we use ARMA model to study monetary supply、exchange rate and interest rate respectively, Second, we use VAR model toanalyze their mutual effect about co-integration、dynamic dependence andimpulse response. In chapter4, based on Chapter3, we use BEKK model toanalyze how monetary supply、 exchange rate and interest rate adjusteconomic growth and how monetary supply、exchange rate and interest ratecontrol financial risk. Chapter5, we give some advices based on our study.Last, we summarize the conclusion of this paper Research find that monetary supply、exchange rate and interest rate donot have a long-term stable relationship. In addition, exchange rate has aquickly response to interest rate; by contrast, interest rate responds slowly toexchange rate. Empirical results indicate that changing monetary supply canmeddle in exchange rate market effectively and adjust economic growth further.By contrast, changing monetary supply may not meddle in monetary marketeffectively. In addition, the whole market risk in our country may comparativelylarge, which indicates some uncertainty. So, we put forward that when peoplepursue high economic growth, they should also pay attention to financial riskmanagement, seek a sustainable growth mode that emphasizing botheconomic growth and financial risk management.