Financial Shocks And Chinese Business Cycles

Since the reform and opening up in 1978,Chinese economy have rapid growth of nearly thirty years,then Chinese economic growth into the "new normal",during the time the Chinese economic fluctuated greatly.According to Chinese 2017 meeting of the government work report,at present,the leverage ratio is too high,especially non-financial corporate leverage the rate reached about 150%,why do the leverage so high?What are the reasons for the cyclical fluctuations in Chinese economy?Is the cause of economic fluctuation directly contributing to the rise in leverage?Based on the mainstream analysis tool of Modern Macroeconomics-dynamic stochastic general equilibrium(referred to as DSGE model),this paper tries to answer these three questions.By constructing the three sectors DSGE model including credit constraints and financial frictions,this paper tries to provide some explanations for the present economic situation in Chinese.This model consists of three departments on behalf of households,manufacturers and the government,there is a close relationship between them.So when the changes facing manufacturers of financial markets,which has been a financial shock,firms borrowing levels will change,thus affecting the optimal condition of firm profit maximization,thereby affecting the other two sector choice,impact on the real economic variables and financial variables,and ultimately make the economy achieve a new equilibrium state.Based on the premise of definition and description of the financial shock,a total of four kinds of impact conditions in three department in DSGE model are introduced into the production technology,the impact of intertemporal preference shock and investment efficiency,financial impact,parameters are estimated using Bayesian estimation,and then the parameters into the model for simulation.Analysis of the fluctuation of various economic variables in the model in a variety of impact,and through the variance decomposition and the impulse response analysis method to analyze the results.Through the above empirical analysis the main conclusions are summarized:(1)the financial impact is the driving factor Chinese entity economic fluctuation is the most important,it is in the interpretation of output growth,investment growth,debt growth has demonstrated a very important role.Even in the presence of four shocks,the impact of financial shocks on output growth is still over 50%,and the impact of technological shocks is equally dramatic.(2)the incomplete degree of financial market is the main reason that the leverage ratio of non-financial enterprises in China is higher than developed countries.(3)with the development of Chinese economy at the same time,the development of the financial market becomes more mature,borrowing constraints of the enterprises to relax,the impact of financial shocks gradually weakened,resulting Chinese economic fluctuations have eased,the percentage effect began to decline.