Research On The Dynamic Influence Of Financial Cycle On Economic Cycle

In 2008,the global financial crisis caused by the subprime mortgage crisis in the United States severely impacted the macroeconomics of worldwide countries.Therefore,governments began to rethink the impact mechanism of financial development on the macro economy,and the academic community began to study the impact of the financial cycle on the economic cycle.In the past decade,China’s economy has developed rapidly,and the size of the financial market has constantly been expanding.To prevent the recurrence of the financial crisis,China has attached great importance to financial stability.While promoting economic and financial development,China has stressed the importance of holding the bottom line of systemic financial risks and ensuring that financial product effectively serves the development of the real economy.Establishing an accurate financial cycle index can help our country master the cyclical fluctuations of financial development and carry out risk monitoring.A proper understanding of the dynamic influence of the financial cycle on the economic cycle can help our country better grasp the structural influence of financial development on the macroscopical economy and provide a reference for the monetary policy in each stage.Based on the above background,firstly,the index of the financial cycle was extracted by the principal component analysis method and dynamic factor model.Secondly,the fluctuation characteristics of the financial cycle index were analyzed by frequency domain analysis,and the financial cycle within the sample period was divided into stages according to the length of the primary Chinese financial cycle,policy collation,and reference literature;Finally,based on the TVP-VAR model,the dynamic influence of the financial cycle on the economic process is studied by extracting the financial cycle composite index,the macroeconomic economic climate consensus index representing the total economic cycle index,the cycle series of fixed asset investment amount and the cycle series of total retail sales of consumer goods representing the economic cycle component index.The results show that the financial cycle extracted by the two methods is roughly the same and very close to that other scholars removed,reflecting clearly China’s economic development in the sample period.The financial cycle of our country has about three years of central cycle volatility,ahead of the Chinese economic process of about one year,which can be used as an early warning index of our economic development;In the whole sample period,the forward impact of the financial cycle has a positive promoting effect on the total index of the economic cycle,but the result is disparate at different time points.The forward impact of the financial cycle on the components of the economic process is different as well.Fixed asset investment has a positive effect in the short term and a negative effect in the medium and long term.The total retail sales of consumer goods hurt in the short time and have a positive impact in the medium and long term.