Research On The Fluctuation Of Bank Credit And Output Fluctuation From The Cycle Perspective

During the current global financial crisis, the rapid credit expansion is considered to be one of the major factors leading to the instability in the China’s financial system, Credit as the representative of the financial variables widespreadly concerns academics and policy researchers. Researches are mainly reflected in two aspects:one considers credit can efficiently form capital,but at the same time may also give a huge potential risk of excessive credit including a lot of valuable information to forecast the financial instability.One considers the financial cycle is unlikely the economic cycle,and it has its own characteristics. Without the financial cycle,you can not perfectly understand the economic cycle. Numerous studies show that ignoring the importance of credit and other financial variables is a very dangerous thing, and managing credit effectively is extremely important and urgent. The timing of the outbreak of the financial crisis also come across crucial period of domestic financial reform, accelerate the pace of market-oriented reform of interest rates,.following the release after the lower lending rates, deposit interest rate ceiling is also expected to be released within a year or two. Our banks have some characteristics of banks in mature economies, also has its own characteristics. In the context of the current global financial crisis, combined with the characteristics of China’s economic transition, this paper Systematically explored the important role of bank credit to output and the management of bank credit.This paper first examines bank credit’s typical characteristics,and the factors that influcing bank credit in China. Cross-country comparisons show that the post-crisis credit growth of China’s non-financial enterprises is fast, while the size of the household sector credit remains at a low level. From the total perspective, based on MS-AR analysis, the steady growth path of credit/GDP is at a lower speed, but with a smaller probability of converting to a higher growth rate. In analyzing the impact factors of commercial bank credit, based on the introduction of net capital, loan ratio, capital adequacy ratio and other indicators to the CC-LM model, the paper expands the theoretical model, and constructs a comprehensive analysis framework. Empirical analysis shows that lending rates to affect bank credit is not obvious, and the impact of the deposit reserve ratio, loan to deposit ratio constraint indicators of bank credit is more obvious, as a whole the effect of quantitative tools is better than price-based instruments, the banks’own balance sheet characteristics have an impact on bank credit through indirect channels.On bank credit and output relationship analysis, this paper is mainly based on the impact on output growth in credit analysis, and discusses the relationship between the credit cycle and output cycles from the cycle perspective. Based on Deidda (2006) model, considering the existing investment-driven growth model, we construct the theoretical framework about bank credit support and output growth under certain economic and financial structure. For in terms of the size of credit provided by financial intermediaries, there is an optimal level of credit scale corresponding to the highest economic growth. And through non-parametric, semi-parametric and dynamic GMM methods of data analysis of China’s experience, the study supports the above conclusion:In our current economic and financial structure of the particular context, there is the existence of the optimal size of credit, and credit scale (long-term bank loans/GDP) of the optimal range is about80%to90%. After considering bank financial structure, the result is also very robust. When the size of credit is less than the interval, credit could promote output growth significantly; And when the size of credit exceeds the interval, credit could begin to highlight the negative effects through the quadratic term credit. This part also examines the sustainability of China’s investment-driven economic growth model from the credit perspective.In addition, the paper further examines the relationship between bank credit and output from the cycle perspective. From the first impression, the relationship between bank credit gap and output gap is not stable, staged a pro-cyclical relationship, and staged a counter-cyclical relationship, one can not ignore the problem which role monetary policy plays, especially during the great recession monetary policy could operate counter-cyclically. This section is based on the structural vector autoregression model (SVAR) with sign restrictions. From the interaction mechanism of the credit cycle, the output cycle and monetary policy regulation point of view, after controlling the other factors, the negative shock of the credit gap to the output gap is negative, and the negative shock of the output gap to the credit gap is negative too.The relationship between the credit gap and the output gap is stable.Finally, based on the foregoing analysis, we analysis credit management mechanism in China, and judge the development of relevant factors and make relevant recommendations.