Research Of Relevance Between Credit Behavior And Financial Stability

The adjustment of the size of credit is an important intermediary means ofmacroeconomic regulation and control of monetary policy,credit behavior couldpromote economic development in a certain degree,company will have adequatefunding to expand production in order to make more profit by the credit facilities,socredit could promote economic development.If behavior of credit in the controllablerange,enable the economy to maintain a rapid growth in the case of a lowinflation.However, with the good expectations for future economic.Governments andcentral banks often overlook the control credit expansion which makes the transferof risks in credit behavior is more prominent, the more risks of corporate defaultswill passed on to financial institutions,the factors of instability in the financialsystem will increased.It is observed that many country has varying degrees ofexpansion of credit before the financial crisis.This shows that credit acts incorrectlymay make the the financial system face a greater risks.The main content of this article are as follows:The first section describes the background of the proposed topics, researchideas,practical significance, as well as specific empirical methods. The secondsection describes the definition of financial stability and some analysis of reasons forthe financial stability.And based on the model AG, simply analyzed the thetransmission mechanism of credit misconduct affect the financial stability. The thirdpart make empirical analysis by the representative data of56countries and regionsworldwide.Study the intrinsic relationship of credit with systemic banking crisisprobability to explore the impact of the credit changes of financial stability. Thefourth part research how credit behavior affects Chinese financial stability analysisbased on the financial conditions index.The following basic conclusions of the above empirical: First,credit will result in instability of the financial system, Enterprises throughloan financing will transfer the risk of the business to financial system from theenterprise.Second,excessive expansion of credit will make a country’s financial crisis hasgreatly increased.Therefore, countries in the pursuit of rapid economicdevelopment,should be more concerned about their degree of credit expansion.Third,we found that the FCI by adding the balance of loans of financialinstitutions can stillpredict future inflationary pressures by calculation of the Chinesefinancial conditions index.The standard form of the Financial Conditions Indexworse predictive ability for futureinflationary pressures,because of the credit is themost important intermediary in the implementation process of Chinese monetarypolicy channels.Fourth,credit misconduct may leadmacroeconomic face greater inflationpressure in future and spread to the entire financial system,caused the shock of thefinancial system.On the contrary,appropriate credit behavior able to make faster andmore stable economic development.