Research On Formation Mechanism And Quantitative Measurement Of Financial Repression

After the reform and opening up,China's financial industry has developed rapidly,and the rapidly developing financial industry has many problems in promoting economic growth.Bias of financial development,asset mismatch,insufficient effective innovation,and detachment are in line with the characteristics of financial repression.Financial repression will bring financial system risk accumulation.Regulators will suppress the asset bubble and financial procyclicality by adopting policy instruments such as loan value ratio constraint and debt-to-income ratio constraint.Economists call this stage financial suppression 3.0.This forms a cycle of financial repression,that is,the existence of financial repression increases the risk of the financial system,and in order to reduce the risk,it also uses financial suppression policies to constrain.Under the goal of “holding the bottom line of systemic financial risks”,the status of financial repression is particularly important.Based on this,the direct question we face is how high is China's financial repression? What are the factual characteristics of China's financial repression? What are the influencing factors of financial repression? What is the formation mechanism of financial repression?First of all,this paper analyzes the formation mechanism of China's financial repression from the perspective of political centralization and economic decentralization.Under the top-down government management system,the central government's pursuit of economic growth has led to GDP growth becoming the assessment standard for local government officials.The one-sided pursuit of GDP growth and the restrictions imposed by officials will lead local government officials to make short-sighted economic decisions,thus extending the “distorted hand” to the financial system.After the tax-sharing reform,the central government's right to collect financial resources was actually accompanied by the decentralization of more expenditure responsibilities.The mismatch of financial powers has led to an increase in local government financial pressures,thereby strengthening the intrinsic motivation of the government to intervene in the financial system.Secondly,this paper measures the degree of financial suppression at the national level from the five dimensions of interest rate control,credit control,financial requirements for preparation,capital account control and financial development.The selected numerical indicators are real deposit interest rate,loan ratio of state-owned enterprises,and deposits.Reserve requirements,the proportion of domestic assets inflows and outflows to GDP,and the ratio of domestic credit to GDP provided by financial institutions,the principal component analysis method was used to construct the national financial restraint index from 1982 to 2016.The degree of financial repression in China has generally declined.Before 2000,it fluctuated sharply,and has been at a moderate level since then.When measuring the degree of financial suppression at the provincial level,ten indicators were selected comprehensively.According to the constructed index results,the degree of financial suppression in each province is very different,especially between the eastern and western regions.The financial repression levels in Beijing,Shanghai,Zhejiang and Guangzhou are very low,while the financial restraint levels in Qinghai and Tibet have remained high.Finally,this paper empirically studies the influencing factors of financial repression.The empirical results show that the greater the pressure of promotion and financial pressure on local government officials,the higher the level of financial repression.In addition,the proportion of non-agricultural economy and the proportion of non-state-owned economy also weaken the degree of financial suppression.Fiscal pressures and promotion pressures also have impaction on the eastern and central and western regions,but for the eastern region,the effects of fiscal pressure are not significant.Financial restraint at the national level is mainly affected by industrial structure and ownership structure,and fiscal pressure will deepen financial repression,but it is not significant.