Simulation Analysis Of Financial Accelerator In Dual Economies

To recognize the reason and transmission mechanism of macro-economics, to study the persistence of economic fluctuation are the core problems faced by the economic theorists, the positive school and the macro-economic regulators. But the traditional models such as IS-LM model, RBC model,are based on opinionated theory that The theorem of Modigliani-Miller is always correct. However, both The Subprime mortgage crisis and the European debt crisis indicated that there is an inseparable relations between the substantial economy and the financial sector. The defection of Financial supervision system is the cause of crisis. In fact, the influence of financial market to substantial economy is strength.Under such circumstance that the financial market develops deeply and quickly, the exogenous shocks to substantial economy increased the fluctuation of macro-economy through the transmission of financial market. In other words the financial accelerator effect is common in the fluctuations of macro economics.In order to estimate, simulate and calculate the financial accelerator effect of monetary policy under our special economy structure, we built a dynamic stochastic general equilibrium model with financial accelerator according to our dual-economic structure, and derived the entire form of the optimal debt contract among banks and entrepreneurs. After that, we calibrated the parameters with the actual data of China, and performed simulation analysis. Compared the simulated results, we found the existence and asymmetric of financial accelerator. The financial accelerator increases the economy’s response to monetary policy shocks and government shocks and decreases the response to productivity shocks. Private enterprises are more sensitive than the state-owned enterprise when affected by the same level of the nonfinancial shocks. Both the demand-side financial shocks and the supply-side financial shocks can cause economic volatility. Specially, a positive enterprise risk shock, bank loan productivity shock and interbank lending shocks will cause the decrease of the GDP, investment and so on. Moreover, the result of variance decomposition shows that the majority of forecast error variance of our variables can be attributed to the supply shocks of finance, mainly to the bank productivity shock originating in the large banking sector.