Financial Accelerator Financial Friction And Economic Fluctuations

The financial turmoil that began in the United States in 2007 swept the world,causing violent economic turmoil in the international area,which greatly impacted the smooth operation of the world economy.For China,housing prices fluctuated drastically,stock market value evaporated sharply,financial institutions fell short,and foreign exchange reserves have fallen rapidly.These have caused many uncertainties in China's economic and financial development,and have had a big impact on China's economic growth.At present,China is facing a new situation of “three-phase superposition” of digestive period of economic stimulus plan,painful period of economic structural adjustment,and growth rate shift period;economic development has entered the “new normal” period,and the trend characteristics of the new economic normal are being formed and revealed.In the context of supply-side reform,“de-capacity,deleveraging,cost reduction,and short-boarding” are the difficult responsibilities that enterprises must face;in the new normal background,the financing methods of enterprises have also quietly changed,the structural reforms of enterprises also affect corporate financing methods.This also increases the uncertainty of the operation of the entire financial system.It is a new challenge in the new era to hold the bottom line of the explosion of systemic financial crisis.In the new era,the international economic and financial situation is still complicated,and any small financial variable shocks may have a serious impact on economic development,and there are hidden dangers of financial crisis.In recent years,China's capital market prices and real estate prices have fluctuated drastically.The financial regulatory authority has introduced a number of macroeconomic regulation measures to moderately intervene to reduce the impact of asset price fluctuations on the real economy.China's monetary authorities should fully realize the importance of the impact mechanism of financial markets on the macroeconomic impact,on the one hand to curb its amplification effect on the economic downturn,and on the other hand to promote its contribution to economic growth.As China's financial market and international financial markets become increasingly connected,special attention should be paid to external shocks,especially the impact of monetary policy spillovers from other countries on China's economic volatility.Under this background,studying the basic characteristics,transmission mechanism and theoretical research and empirical research on the mechanism of china economy of financial accelerators could provide a theoretical basis and practical reference for China to design and implement macroeconomic policies and ensure stable economic growth.It has important theoretical and practical significance.Facing the new economic and financial development trend,this paper attempts to solve the following three problems through scientific research: Firstly,whether there is a “financial accelerator” effect and phenomenon in China's financial market,that is,whether financial shocks can amplify and accelerate the fluctuation of the economy.Secondly,what kind of transmission mechanism exists in China's financial accelerators,what are the characteristics,and through which channels and variables affect the real economy;thirdly,facinge such amplification effect,what measures and measures should China's economic and financial regulatory authorities take to stabilize the effect of the financial accelerator mechanism on negative shocks.To this end,this paper is devoted to expounding the correlation and mechanism on China's financial accelerators,financial friction and economic volatility growth.To begin with,from the theoretical level,introducingthe basic concepts,theoretical development and empirical research status of financial accelerator in detail,sorting out the process of financial acceleration theory from ideological germination,basic model to continuous enrichment and expansion for future empirical study.The empirical research is the focus of this paper.We have conducted empirical research on financial accelerators,financial frictions and economic fluctuations in the following aspects.Firstly,by constructing a relatively simplified benchmark model,and using impulse response functions we compare and analyze the impact of financial accelerators on the operation of the real economy.We also compared the impact of exogenous shocks on macroeconomics under different economic structures.The results show that the existence of financial accelerators will have a significant impact on the macro economy.Compared with the model without financial accelerators,when the financial accelerator is introduced,the impact of external shocks on the economy is more significant.In addition,under different economic structures,the impact of exogenous shocks on the real economy is also significantly different.When the proportion of high-debt sectors in the overall economy increases,output,consumption,investment,and interest rates fluctuate significantly after impact.Secondly,through the establishment of a DSGE model with a sticky price and a new Keynesian framework with a financial accelerator mechanism,and introducing nominal interest rates and price rigidity in the model,we explore the applicability of the financial accelerator model in China.Theoretical research shows that information asymmetry in the bank credit market has caused the emergence of financial accelerator utility.The initial impact of financial accelerators on output and inflation is relatively small.This is due to the fact that the monetary policy rules of the monetary authorities have a regular response to economic fluctuations,which inhibits the generation and spread of fluctuations in the economic system.Thirdly,through the construction of a closed economy new keynesian macroeconomic model,we describles the role of financial friction in the currency transmission mechanism,and attempts to conduct research from the traditional interest rate channels as well as credit and bank loan channels,and emphasize the impact of the existence of financial friction on the implementation of monetary policy.The study finds that financial friction is a very important part of the monetary policy transmission mechanism.The existence of financial friction tends to increase the sustainability of monetary policy,and it will also amplify the impact of interest rate changes.In addition,financial friction has potential asymmetry and sporadic,which may cause uncertainty in the magnitude and timing of the economy's response to monetary policy changes.Fourthly,by constructing a vector autoregressive model with quadratic time trend,we study the cyclical phenomenon of five different interest rate term price cost premiums(PCM)in China's banking industry,and add control variables to constrain credit risk periodicity,and interest rate term structure and the impact of monetary policy on PCM,the study found that with the subprime crisis as a turning point,there is a structural mutation in the linkage effect between price cost premium and economic cycle,after entering the “new normal” era,this effect appears gradually stable,indicating a stable monetary policy and financial accelerator effects are waning,although playing a large role in preventing risks,the driving force for the real economy and economic growth is also weakening.Fifthly,through the construction of a new Keynesian macroeconomic model involving real estate and credit friction,we analyse the dynamic characteristics of the anticipation-drived short-term liquidity trap problem.This study found that from a quantitative perspective,this model cannot explain the current fluctuations in China's actual output and real estate prices.The numerical simulation results show that as long as most enterprises have lower growth expectations and higher inflation expectations,China's economic growth process will converge to the steady state of low growth and high inflation.Obviously,this result is a serious departure from the current situation.The results of counterfactual analysis show that China's current financial market friction and simple financial accelerator effect are not the main reasons leading to current economic fluctuations.Therefore,it is necessary to carry out strategic thinking from the market basic conditions and policy regulation.Regardless of the above theoretical analysis and empirical analysis,we all believe that under the “new normal” era of China's economy,financial market friction and product market friction exist simultaneously,and there is a close relationship between financial acceleration,financial development and financial stability.Financial supervision should be strengthened in the process of national macroeconomic management and focus on financial stability,and actively play the role of financial development and financial innovation in promoting the real economy,while monitoring the financial friction and financial instability caused by the financial development and the real economy,ensuring economic growth in a stable and speedy way.