Theory And Empirical Analyses Of Financial Business Cycle

The financial business cycle is the thread of the article.The essence of this theme is the relationship between financial factors and the real economy,and the financial business cycle is also generated from that.Actually,financial business cycle is of great practical significance,not a theoretical notion.It is always controversial to the relationship between financial factors and the real economy,which has not reached a consensus yet.However,after the global financial crisis in 2008,researchers began to pay more attention to this question,believing that the real estate price and credit are supposed to be regarded as the key point of the macroeconomic in the coming years.The analysis perspective from financial business cycle is more in line with the economic circumstance of current social.The financial business cycle is based on the real business cycle.Two aspect of this article is theory analysis and empirical analysis.Chapter one and chapter two introduce researches about business cycle and financial business cycle to state the process of putting forward and development of these theories.The financial business cycle theory mainly has had three kinds of research directions so far from its emergency.It is of vital significance to choose proper variables to identify financial business cycle.Chapter three explains variables that can describe features and truths of financial business cycle.These variables can be divided into five varieties.Recently,identifying the financial business cycle requires real estate price(or asset price)and credit volume as the main identification variables,supplemented by other macroeconomic variables related to the financial market.It is expected to form a complete identification standard based on these variables in the near future.According to researches by now,its empirical characteristics can be summarized through time series of variables mentioned above,which may play a crucial role in measuring the cumulative risk of financial crisis in real time and optimizing the real economic structure.The neo-classical macroeconomics does not pay enough attention to the financial factors.In fact,models used for analyzing cyclical fluctuations should never neglect the influences of financial factors.The second part of this paper is the application of the financial business cycle theory,the financial business cycle model.This model may be the best usage of financial business cycle theory,which contains financial factors in a standard DSGE model analyzing business cycle and economic growth.Chapter four illustrates analyzing framework of the financial business cycle model.The core idea of the financial business cycle model is to add "financial accelerator" to cycle models by theories of capital prices and Life-Cycle Hypothesis of consumptions.Through mechanisms of "Principal-Agent issues" and liquidity constraint,this accelerator affects numbers of aspects of macroeconomic.Chapter five constructs a DSGE model of two sectors containing the "financial accelerator",analyzing quantitatively four kinds of exogenous shocks to conclude impulse response functions of the model.Outputs of the model confirm the fact that after financial liberalization and deregulation since 1970 s,the conduction and amplification of financial system on economic impact exacerbate instability of economy.Financial factors are not supposed to be neglected when investigating economic cyclical changes.After that,by analyzing trend of main variables of the model,I have studied transmission and amplification mechanism of financial factors started from negative economic shock.Finally,in chapter 6,the article views that traditional monetary policy and other macroeconomic policies should not only focus on the traditional indicators such as inflation,unemployment rate and so on.That is to say,the "moderate" performance of those variables does not represent that there is no inherent instability risk or any other market structure imbalance in economy.Frameworks of monetary policy should be changed from the quantitative adjustment tool to the asset price type(interest rate)adjustment tool.