| High leverage is a prominent problem facing by the Chinese economy.In recent years,after a series of "Deleveraging" policies,the rapidly increasing speed of macro leverage ratio has gradually slowed down.However,the household sector leverage ratio has risen rapidly.Since 2013,the leverage ratio of residents has continued to grow at a relatively high rate,rising from 32.3% to 55.8% in 6 years,with an average growth rate of 12%.Rapidly growing residents` debts have raised concerns about the purchasing power of residents will be damaged.At the same time,housing prices also experienced a new round of growth during this period.The continuous rise in housing prices has led to an ever-increasing share of housing mortgage loans in residents’ debts,with concentrated debt and risk.Meanwhile,higher housing prices have caused the real estate industry to concentrate a large amount of funds and accumulate a large housing price bubble.This has brought out higher financial systemic risks to the economy.Based on the above background,studying the relationship between household leverage,housing prices and financial stability will help us to deepen the understanding of these 3 variables.Thus,we can have more empirical evidences for the regulation of household leverage,housing price and financial stability.Based on monthly data from 2015 to 2018 in 30 provinces across China,this article analyzes and examines the dynamic relationship between household leverage,housing prices,and regional financial stability.At first,the article preliminarily sorts out the influence mechanism of each variable,which lays a foundation for the later model.Secondly,it describes the current status of the household leverage at this stage and recalculates the ratio of each province during this time period in China.It is found that there is less room for further increase in the leverage ratio of residents in China and the actual debt repayment pressure of residents is relatively greater.Again,by selecting 11 specific indicators,the financial stability of each province was measured.It is showed that the financial risks in the northeast and northwest regions are relatively higher.Finally,a PVAR model is constructed between household leverage,housing prices and regional financial stability in 30 provinces.The study finds that the increase in household leverage and housing prices will increase regional financial instability and the degree of financial risk.The impact of the household leverage ratio on financial stability reaches its highest point after the first period and it lasts for 4 months.The impact of house prices on financial stability is 0.213 and the highest effect is observed in the second period.The study shows that there is a positive effect of mutual influence between household leverage and house prices.The effective period between the two variables is 6 months.The ability of residents to explain the change in house prices is 35%,while the explanation of house prices to the changes of house leverage is relatively small.In addition,the regional regression shows that the financial stability coefficient in the eastern region is more sensitive to changes in households leverage and housing prices.Based on the above conclusions,this article puts forward five suggestions for the relationship between the three variables. |
