Research On The Influencing Factors,Macro Effects And Regulation Of Household Leverage In China

The issue of high household leverage is one of the prominent challenges facing China’s economic development at present.High leverage often comes with high risks,as demonstrated by international experiences such as the 2008 financial crisis,which showed that household debt issues have significant impacts on economic development and financial stability.Currently,household leverage in China remains at historically high levels,and the distribution of household leverage across regions is severely imbalanced,posing hidden risks to the macroeconomic operation in our country.Under the impact of the COVID-19 pandemic during 2020-2022,coupled with the complex and volatile international political and economic landscape,China’s economic and financial system is facing increasing pressure.Excessive household leverage will exacerbate macroeconomic vulnerabilities.Against this background,it is of great practical significance to study the influencing factors,macro effects,and macro-prudential regulation of China’s household leverage to prevent systemic financial risks,maintain the financial system stability and promote high-quality economic development.Firstly,this paper examines the spatial distribution differences,clustering,and trends of household leverage in 280 cities in China from 2015 to 2020,and further explores the influencing factors of household leverage.The results show that there is a clear trend of "leveraging up" of household leverage in China’s cities from 2015 to 2020,with significant regional differences and a clear gradient of high household leverage in the east and low household leverage in the west,as well as a spatial clustering effect.The price of housing,the area of housing for sale,the digital financial inclusion index,and the Gini coefficient significantly increase household leverage,with housing prices having the largest impact on household leverage,and there is a distinct spatial spillover effect.The results of the spatiotemporal weighted regression(STWR)show that the coefficients of house prices,the Gini coefficient,and the digital financial inclusion index on residential leverage are larger in the coastal regions and smaller in the central and western regions,with an overall trend of decreasing from east to west.Secondly,this paper uses the CRITIC entropy method to synthesize the systemic financial risk index(FSR)and constructs a TVP-VAR model to explore the time-varying impact of household leverage on the real economy and systemic financial risk.The results of the study show that China’s systemic financial risk index is at a high level in three periods:2007-2009,2015,and 2019-2020,which is basically in line with the reality of China’s economic operation.The results of the TVP-VAR model test show that the leverage of the household sector will have a dampening effect on the development of the real economy in both the short and medium to long term,and in the medium to long term,household leverage will push up systemic financial risks,which is not conducive to financial stability.Finally,by constructing a dynamic stochastic general equilibrium(DSGE)model with six economic agents: patient households,impatient households,entrepreneurs,retailers,commercial banks,and macro-prudential authorities,the paper examines the regulatory effect of macroprudential policy on household leverage and the coordination of different macroprudential policy instruments.The results show that all three macroprudential policy instruments have countercyclical effects,with loan-to-value(LTV)outperforming debt-to-income(DTI)and capital adequacy ratio(CAR),and that LTV can effectively reduce household leverage,but the duration of a single instrument regulation is limited;the welfare loss function shows that the policy combination of house price-fixing LTV and credit-fixing DTI has the strongest effect on the macroeconomic regulation of household leverage.The combination of house price-fixing LTV and credit-fixing DTI is found to be the most effective macro-regulation of household leverage.Based on the above research findings,this paper proposes policy recommendations in three areas: firstly,promote the stable and healthy development of the real estate market,regulate household leverage according to local conditions;secondly,consolidate and strengthen the real economy,and actively promote common prosperity;thirdly,enrich the toolbox of macro-prudential policies,and strengthen policy coordination and cooperation.