Application Of Sign Restriction On TVP-VAR Model In Loan Supply And Demand Shocks In China

Since the introduction of the VAR model by Sims(1980), VAR has been widely used because of its unique advantages in structural analysis and has become the main tool of macroeconomic analysis. However, even if the economic variables is determined to follow the simple law, it would be extremely complex to model them. Under the complex reality, using the SVAR model in the empirical analysis generated something contrary to the conclusions of the economic common sense, such as "the mystery of the price","interest conundrum","exchange rate puzzle" and so on. The reason for this phenomenon may be that the form of the SVAR model is too harsh. On one hand, the fixed parameters can not reflect the changes in the structure of the economy, on the other hand, constraints condition usually set by equation which is too strong for the identify mechanism.To solve these problems, this dissertation studies the sign restriction on time-varying parameters VAR model. As for the identification mechanism, the model uses the widely accepted economic common sense to create sign constraints in impulse response function. As for the model parameters, the model introduces the dynamic evolution mechanism of the coefficient and the variance-covariance matrix to reflect structural changes in the economic reality. The advantage of sign restriction on time-varying parameters VAR Model is its ability to avoide misspecification maximum by put less restriction on the model and let the data determine which the model is better. In addition, the equality constraints are limited when economic variables interact at the same period, while the sign restriction can recognize the influence of different shocks separately.The dissertation retrospects the SVAR model firstly and then anatomy how to establish, estimate and apply the sign restriction on VAR model. Next, explains the TVP-VAR model in detail, and introduces the sign constriction into the model. In order to obtain direct evidence of the model structure changes, the model uses Markov transfer vector to determine whether and when the model parameters change before the setting of the dynamic characteristics of the TVP-VAR model parameters. The estimation of TVP-VAR model is a heavy work, the dissertation explains the estimation method step by step.Credit market is an important bridge to join financial system and the real economy. Existing credit theoretical and empirical analyzes show that China’s credit market has the distinct character of volatility and the conduction of credit shocks has significant asymmetry. In the empirical field, however, there is still a lack of tools to characterize these features of the credit market. After the theory analysis of sign restriction on the TVP-VAR model, the dissertation identify the loan supply shocks and demand shocks, and analyses the nature, dynamic characteristics and conduction mechanism of the different shocks. The dissertation found the credit shocks have the distinct character of time varying, For the policy makers, the timeliness of policy should be an important consideration; the economic fluctuations varied vastly during different periods, economic overheating and increasingly cold will be significant change volatility; the government should be more focus on the regulatory role of the market, and to exercise demand management policies prudent to enable the effectiveness of policies.Contributions of the dissertation can be stated as follow:First, domestic research on the mechanism of sign restriction and TVP-VAR model is just underway, the dissertation combines the two methods, elaborates the theory in detail and riches empirical tools; Secondly, the dissertation integrates the time-dependent coefficients, random fluctuations and Markov state transition into the sign restriction on VAR model, improve the integrity and compatibility of the model which has a certain value in methodology; Thirdly, this thesis summarizes the nonlinearity and asymmetry of the credit market theorically; Finally, research conclusion on the impact of the loan supply and demand in China has an important reference significance for macro-policy analysis.