Research On The Impact Of Financial Deleveraging On Economic Fluctuations

Financial leverage has the features of natural risk attributes and procyclical.Excessive financial leverage is not only the total source of macro financial fragility but also the direct cause that contributes to systemic financial risks.Finance is the heart of the modern economy,and if it has systemic risks,the economy may collapse.Indirect financing plays a main role in China's capital market,and the total assets of banking financial institutions account for a higher proportion of total financial assets and GDP.With the deepening of financial innovation and financial liberalization,there is a rapid development in off-balance-sheet business of banks including interbank business and wealth management.The shadow banking system grows dependently on the traditional financial system,and the financial risks from its rapid development are spreading like viruses in the market.For being in a gray area,they are unregulated and expanding,and then the“blood-sucking effect”on the economy is becoming increasingly obvious.The financial leverage process of relying on shadow banking has become increasingly complex,making the financial system more complex and more vulnerable.Financial products have directed resources to zombie companies and ineffective projects.Instead,manufacturing has shrunk for lack of funds.At this stage financial de-leverage has been fully launched.Its essence is to regulate and supervise financial innovation and shadow banking and curb the excessive leverage from the financial sector.^[1]Under the goal of preventing and controlling financial risks and deepening financial reform,it is necessary to evaluate the effect of deleveraging on macroeconomic stability.By studying the relationship between them,we can better understand the operational mechanism and take effective measures to leverage,which has a great development significance for reducing financial risks and slowing economic fluctuations.This paper takes financial de-leverage as the research object,aims for sound positive de-leveraging,and directs at the leverage of the banking financial institution.Through the specific analysis of the condition and products of financial plus leverage and the risk of high leverage,the paper will discusses the necessity of financial deleveraging.With the theory of short-term economic fluctuations,it analyzes the impact of financial deleveraging on economic fluctuations from supply and demand.In terms of the experience of the major developed economies in the world,different countries have different levels of financial development,which makes financial de-leverage has different effects on the economy fluctuation.From the perspective of global finance development,this paper offers an empirical analysis of the impact of financial deleveraging on macroeconomic fluctuations with non-balanced panel data of 30 countries from 1998 to 2017,and then examines whether different financial development levels makes a difference in financial deleveraging and economic volatility.Resulting shows that financial deleveraging will increase economic volatility.The development of financial markets dominated by direct financing will inhibit the negative impact of financial deleveraging on economic volatility.The development of financial intermediation mainly based on indirect financing will amplify the negative impact of financial deleveraging on economic volatility.Compared with the US financial deleveraging,we can gain successful experience.Under the cross-country empirical evidence based on the perspective of global financial development,we should not only adopt clear and controllable means to promote steadily,but also accelerate the development and perfection of financial markets to alleviate the negative impact of financial deleveraging on the economic fluctuations.