The Research On Threshold Effect Of Financial Stress On Economical Development

Currently,the growth rate of China’s economy is gradually slowing down.As a result,social problems have become increasingly prevalent.As a crucial sector of national economy,the financial industry serves as a platform where different industries exchange their real-time market information and where money comes and goes,and it also plays a vital role in improving people’s well-being.Therefore,its fragility will undoubtedly represent problems not only to the industry itself.It will also bring substantial impact on the stability of the development of national economy as a whole.It is helpful to study the financial pressure index to evaluate the internal fragility of the current financial industry and its external pressure.Further study on the relationship between financial pressure and economic growth will undoubtedly contribute ideas and exert efforts for the economic development.This paper mainly studies the threshold effect of financial pressure on economic growth through two aspects:on the one hand,through the analysis of relevant literatures at home and abroad,this paper analyzes the current situation of China’s financial industry and the impact of mechanism of financial industry on economic growth;on the other hand,the principal component analysis is used to measure the financial pressure index,and the threshold effect equation of financial pressure on economic growth is constructed.This paper also seeks to analyze how economic growth will be different under the financial pressure through further analysis on the threshold of different M2 growth rate,fixed asset investment growth rate and export growth rate.This paper has employed quarterly statistics from banking,securities,foreign exchange and insurance sectors from 2004 to 2015 to measure financial pressure index.With basis of this measurement,this paper has established the threshold model of financial pressure on economic growth,and obtained following conclusions:(1)currently,China is experiencing high financial pressure;(2)financial pressure index can be used as an indicator to predict whether the financial industry is booming or not;(3)financial pressure is negatively correlated with the growth rate of economic development,which indicates that financial pressure can undermine economic growth;(4)financial pressure has higher chance of undermining the growth rate of economic development when the three threshold variables which include fixed asset investment growth rate(FI),export growth rate(EX)and broad money growth rate(M2)aresmaller than the threshold value.Finally,on the basis of theoretical analysis and empirical conclusions,this paper has put forward targeted policy suggestions to reduce financial pressure and promote economic growth.