China's Financial Leverage And Economic Growth:An Empirical Study Based On Gmm Model

The US subprime mortgage crisis in 2008 triggered further discussion on the relationship between financial leverage and economic growth in domestic and international academic circles.The traditional view is that financial leverage will promote economic growth,but after the crisis,the academic community deeply understands that there may be more complex nonlinear relationships between financial leverage and economic growth.At the same time,China has also put forward the slogan of industry de-leverage in recent years,and believes that excessive leverage is not conducive to the development of China's economy.In this context,this paper explores the impact of financial leverage on economic growth from the perspective of debt level,and studies the inherent relationship between financial leverage and economic growth.Firstly,it sorts out and summarizes the research trends of financial leverage at home and abroad.On this basis,it introduces the theoretical concept and mechanism of financial leverage.Secondly,through the statistics of statistics,the current status of China's financial leverage is analyzed.Finally,this paper selects three economic growth indicators(GDP growth rate,per capita GDP growth rate,urban per capita disposable income growth rate)as the explanatory variables of the study,and introduces four indicators(industrialization rate,savings rate,urbanization rate and As a controlling variable,the dynamic panel data of 31 provinces and municipalities in China from 1998 to 2016 were selected to study the relationship between financial leverage and economic growth based on the GMM estimation method.Through the empirical results,the following conclusions can be drawn:(1)There is a non-linear relationship between financial leverage and economic growth,and the assumptions of the model match the inverted “U” type,that is,there are two stages in the impact of financial leverage on the economy.Before the leverage ratio reaches the“U” critical point,its role is to promote economic growth.When the “U” type critical point is exceeded,the leverage will inhibit economic growth.(2)After the model is gradually added to the control variables,the two still exhibit an inverted "U" typecorrelation.Moreover,the results of the regression passed the Sargan test and the Wald test of the model,thus demonstrating that the results obtained were valid.(3)Based on the empirical results of the relationship between financial leverage and economic growth,combined with the actual situation of China's current financial leverage,the paper predicts China's financial leverage ratio from 2018 to 2020.The forecast results show that China's leverage ratio will exceed 1.5 in 2019.This means that China's financial leverage will soon enter the critical point of the “U”-type region.Therefore,China is currently facing the challenge of high leverage,and it is imperative to leverage.To this end,China can improve its direct financing ratio through financial supply-side reform policies,and at the same time adopt measures such as expanding equity financing and strengthening financial supervision to achieve the goal of financial de-lost,thereby smoothly crossing the bottleneck period of economic growth and realizing economic aggregates.Coordinated development with both aspects of quality.