Financial Accelerator:from The Perspective Of The Commercial Banks

With the development of financial markets, and the deepening of the financial reform, financial system shows more and more influence on the real economy. The MM theorem states that the real asset prices are decided by the real interest rate, which means that the credit market is perfect. Obviously that does not conform to the reality. Bernanke puts financial factors into the real economy and comes up with the information asymmetry of both crediting sides. He also comes up with the theory that enterprises face extra cost when they are externally financing, and the extra cost is called the external finance premium. The existence of the external finance premium decides that the economic fluctuations have the trend of strengthening the original directions because of the financial factors, and that is what we called the theory of the financial accelerator. Many literatures have proved the existence of the financial accelerator from both of the theoretical and empirical ways.However the study about the financial accelerator focuses on the part of the balance sheet of the enterprises, and relatively neglects the financial institutions themselves. This thesis takes this point into consideration, and studies how banks as the typical representative of financial institutions affect the operation of the financial accelerator. Banks face more stringent capital regulation because of their unique characteristics. The capital regulation shows obvious pro-cyclical because the bank credit loss is negatively related to the economic cycle. In addition, the balance sheets of banks themselves will go along with the economic fluctuation, and present pro-cyclical. The pro-cyclicality of banks exacerbates economic fluctuation, and that is referred to as the narrow sense of "bank credit channel". This channel shows that the credit amount is positively related to the business cycle. And the main ways of financing are indirect financing for most of the enterprises in our country, so that means the "bank credit channel" has some great power.This thesis uses the dynamic panel data of 16 listed banks from 2006 to 2013, controls some important financial variables such as monetary policy and financial depth and discusses the dynamic mechanism between the bank marginal cost, economic fluctuation and the financial accelerator. The empirical result proves the negative correlation between the bank margins and business cycle, and provides the evidence for the existence of the financial accelerator. In order to understand the influence that pro-cyclicality of the banking industry lays upon the mechanism of the financial accelerator, this thesis establishes a VAR system of net asset, bank net interest margins, new loans of 16 listed banks to the enterprises and the real GDP. This thesis proceeds the granger causality test, impulse response analysis and the forecast error decomposition analysis of the correlation between variables. The analysis of VAR system shows the role of the pro-cyclicality plays in the mechanism of the financial accelerator more clearly.In this thesis, the analysis shows that as the largest loan providers, the commercial banks adjust the amount and the price of the loan according to the balance sheets of the enterprises, and in this way commercial banks can affect the investment of the enterprises and enlarge economic fluctuations.In addition, the pro-cyclicality of capital regulation of commercial banks and the balance sheets can enhance the mechanism of the financial accelerator. We can say that commercial banks play an irreplaceable role in the theory of the financial accelerator. Therefore this thesis comes up with the following suggestions:first, we should improve pre-warning capability of the regulatory authorities and establish the counter-cyclical supervision mechanism. Second, we should establish perfect credit mechanism, so to some extent we can avoid the financial accelerator effect caused by the information asymmetry and reduce the fluctuation that financial system cause. The perfect credit mechanism can help to reduce the financial friction in the credit markets. Third, the enterprises should improve the management ability, so it can buffer the negative influence that the external shocks lay upon the balance sheets of the enterprises.