The Research On The Relationship Between Public Debt And Financial Fluctuation In China

In the past years,financial market,real economy and public finance have become more and more closely linked.In the 2008 sub-prime mortgage crisis,the size of public debt in various economies has been significantly affected due to the impact of financial crisis and financial shocks.From the outbreak of the European debt crisis,the public debt of European economies has been significantly affected by the financial crisis.Before the 2008 financial crisis,many European economies had achieved fiscal revenue driven by credit expansion and the real estate boom,but these economies had not significantly reduced their public debt.During the financial crisis,these countries needed to further expand their debt to stimulate economic recovery,which led to a debt crisis caused by high government debt.From the perspective of China's public debt development context,the scale of public debt has been expanding,but from the perspective of the proportion of public debt to GDP,this ratio has also shown a significant uptrend after the Asian financial crisis and the sub-prime crisis of 2008.The relationship between public debt and financial volatility at home and abroad shows that public debt is not only affected by economic fluctuations,but also by financial fluctuations and financial shocks.Under this background,this thesis studies the relationship between public debt and financial volatility in China,and takes public debt and financial fluctuations as the research object.This paper expounds the theory of public debt,financial volatility and the interaction between public debt and financial volatility,and uses H-P filtering method and Turning point analysis method to analyze the development characteristics of public debt and financial volatility in China.In the empirical analysis,based on the characteristics of public debt and financial volatility in the expansion and contraction stages,we uses the One-way effect casual analysis measure to study the unidirectional causality of public debt to financial volatility and financial volatility to public debt and the long-term and short-term performance characteristics of the relationship.The empirical results show that the public debt variables mainly influence the financial volatility variables in the long run,while the financial volatility variables have both long-term and short-term effects on the public debt variables;on the other hand,the impact of financial boom and depression on the expansion and contraction of public debt is asymmetric.The impact of financial volatility on the asymmetry of public debt leads to thepro-cyclicality of public debt.In order to resolve the risk of public debt and improve the sustainability of public debt,this paper finally puts forward corresponding policy recommendations.