Research On The Impacts Of Credit Frictions On The Economical Volatility

The irrational credit frictions caused by the unsound credit market and the high degree of information asymmetry can spread and amplify the impact on economic fluctuations.Therefore,it is very important to reveal the mechanisms through which credit frictions affect economic fluctuations.Using data from 1970 to 2016 of 102 countries around the world,we analyze the impacts of credit frictions on economic fluctuations.Firstly,we define the concepts of credit friction and economic volatility and review relevant literature on credit frictions and economic fluctuations.Secondly,we analyze the influencing mechanisms of credit frictions on economic fluctuations from the bank's credit rationing channel,the enterprise's external financing premium channel and the market liquidity channel respectively.Thirdly,based on the selected data,the current situation and correlation analysis are conducted.Finally,we use Risk Spread as credit frictons and select one model for empirical test.The results show that the influences of credit frictions on the economic fluctuations have both promotional and suppressive function and there exists a U-shaped relationship between credit frictions and economic fluctuations.That is to say,when credit friction is extremely low,its increase will curb economic fluctuation.While credit friction exceeds a certain critical value,its increase will aggravate economic fluctuation.We sort our samples according to the level of development and periods,the results show that the U-shaped relationship between credit frictions and economic fluctuations is universal,but the credits friction in developing countries have greater impacts on economic fluctuations than in OECD countries;before the year 1995,the effects of credits friction on economic fluctuations are stronger than that after 1995.Finally,combining theoretical and empirical analysis,we put forward following policy recommendations to maintain moderate credit frictions and stabilize the economy: complete credit markets and broaden financing channels;continue to improve information releasing platforms of enterprises and financial institutions to enhance the disclosure of information;promote the interest rate liberalization;make rational use of monetary transmission mechanism;tighten the regulation on financial market;strengthen macroeconomic capacity to withstand internal and external shocks.