Mixing Measurement And Application Of China’s Multi-region Time-varying Transition Non-observed Financial Conditions Indexes

At present,China’s financial system is still dominated by banks,but the unobserved financial system characterized by non-traditional credit financing is highly hidden.Due to the absence of supervision,the unobserved financial activities may lead to systemic risks,and the impact on financial stability cannot be ignored.Therefore,it is of great significance to monitor the unobservable financial system in order to construct a comprehensive indicator that reflects the unobservable economic and financial performance and provides an indicator for private systemic risk,the China Mixed Frequency Multi-region Non-observed Financial Conditions Indexes(MF-MRNOFCI).This paper first determines the measurement method of each unobservable financial indicator,and then measures the quarterly mixing data from April 2012 to December 2019,including the four unobservable financial indicator variables of unobservable credit scale,unobservable currency,Non-observed exchange rate and Non-observed interest rate,and the Non-observed economy as the target variable;Secondly,combining the Mixed Frequency Vector Autoregression model(MF-VAR)with the Time-varying Transition Probability Markov Vector Autoregression model(TVTP-MS-VAR),the Mixed Frequency Time-varying Transition Probability Markov Vector Autoregression model(MF-TVTP-MS-VAR)is constructed.Thirdly,based on the MF-TVTP-MS-VAR model,MF-MR-NOFCI is empirically developed.Finally,this paper studies the relationship between China’s MF-MR-NOFCI and the unobserved economy from the aspects of correlation,leadership,causality and prediction ability,and compares it with China’s mixed two-zone conversion unobserved financial position index(MF-2R-NOFCI)and China’s mixed single-zone conversion unobserved financial position index(MF-1R-NOFCI).In addition,the influence degree of MF-MRNOFCI,MF-2R-NOFCI and MF-1R-NOFCI on macro-economic index and the dynamic macro-economic effect of MF-MR-NOFCI on NOE,GDP and CPI are analyzed and compared.The research results show that:(1)China MF-MR-NOFCI based on MF-TVTPMS-VAR model has regional and nonlinear characteristics;(2)Compared with the Nonobserved Monetary and Financial Conditions Index(NMFCI),China MF-MR-NOFCI contains more unobserved financial information and enables the unobserved financial status to be reflected more objectively;(3)Compared with MF-2R-NOFCI and MF-1R-NOFCI,China MF-MR-NOFCI is a better predictor of the leadership,correlation and causality of unobserved economies;(4)The tightness of China’s unobserved economic and financial operation has regional characteristics on the conduction path and conduction effect of the unobserved economy;(5)The transmission path of China’s unobserved economy is a combination of price and quantity,and the unobserved currency and the unobserved credit scale play an important role.(6)MF-MR-NOFCI has a great impact on macro-economy.Policy recommendations:(1)In financial statistics and accounting,strengthen monitoring efforts to grasp the unobserved financial development trends and laws;(2)The China Mixed Frequency Multi-region Non-observed Financial Conditions Indexes is used as the main monitoring indicator of the degree of tightness of the unobserved economic and financial sectors,and is compiled and released regularly;(3)Focus on preventing the internal risks of the unobserved financial system and improve financial stability.The main innovations of this paper are:(1)Using more objective night light data to measure unobservable financial indicators;(2)The MF-TVTP-MS-VAR model with the characteristics of mixing,time-varying and regionalism is constructed;(3)Drawing on NMFCI and incorporating more Non-observable financial index variables,MF-MRNOFCI is newly compiled.