Study On The Financial Accelerator Effect

Real business cycle theory and the Keynesian genre as the economic cycles of the two traditional mainstream schools, both common in Modigliani- Miller theorem is established for the premise condition, which ignores the financial factors play an important role in the real economic fluctuations. But the real economy has been proved that there can be no perfect capital markets, macroeconomic fluctuations and have shown a relationship between financial factors. The emergence of financial accelerator theory broke through the shackles of traditional economic cycle theory and to determine the credit markets play a key role in economic fluctuations, as the later scholars research provides some new mentality on the economic fluctuation.Financial accelerator effect is the premise of asymmetric information in credit market, the enterprise must undertake the agency cost in external financing, are facing the external finance premium is, at the same time, enterprise’s balance sheet condition significantly affect the financing ability of the enterprise. Inverse of the external finance premium nav pro-cyclical cyclical and enterprise in the same direction on the stack will lead to the financial accelerator effect.The financial accelerator effect shows the characteristics of obvious asymmetry, embodied in: small business financial accelerator effect performance more obvious; Private enterprise’s financial accelerator effect more apparent. Especially in a "bank-dominated financial system, the performance of this asymmetry is more outstanding. China’s financial system is just such a proportion of direct financing than indirect financing system, the most important thing is still a bank loan financing ways, thus highlighted in this paper is set in China market studies the financial accelerator practical significance.This article take the normative research and empirical research on the method of combining, starting from the micro level of study is the financial accelerator effect with Chinese characteristics. This paper analysis on the micro mechanism of the financial accelerator conduction, this paper expounds the tiny hit by credit market economy growing and amplification process, thus explained the phenomenon of "small impact, large fluctuations" economic, laid the foundation theory research in this paper. Moreover, the use of China’s manufacturing industry from 2004 to 2014 financial data of 201 listed companies using PSTR model, the mechanism of action of the financial accelerator effect from the micro level has carried on the empirical test. That is to say, the conditions of corporate balance sheets has a significant impact on business investment, poor status of the balance sheet can lead to a higher premium on external financing, and then continue to impact on corporate investment. In addition, the financial accelerator also showed in different size and different nature of the enterprise on the asymmetry. Finally, this paper analyzed according to the empirical results for the corresponding policy recommendations.