International Business and Management
The Action Mechanism Between Government Debt and Financial Market In China: Analysis of China's Twenty Year History Data Combined With DAG and SVAR
Abstract
This paper uses the sample data of financial market, economic prosperity and government debt related indicators from 1997 to 2017 in China, and uses DAG and SVAR models to study the linkage mechanism among macroeconomic variables. The results show that there is a causal relationship between financial market, economic prosperity and government debt, and the former two are the transmitter of volatility factors, the latter is the receiver. In the long run, the impact of global economic and capital market volatility on China’s government debt risk is significantly higher than the real estate industry and price level and other domestic factors. Active fiscal policy will make the risk of government debt show a rising trend, it is worth noting that the development of financial markets and economic prosperity can reduce the impact of fiscal policy on the economy, thereby alleviating the risk of government debt.
Keywords
Full Text:
PDFReferences
Ping, X. Q., & Bai, J. (2006). China’s fiscal decentralization and the supply of local public goods, Finance and Trade Economy. (2), 49-55.
Chen, L. Q. (2010). Thinking about standardizing the development of local government financing platform. Local Finance Research, (11), 38-43.
Brandt, L., & Rawski, T. (2009). Great economic transformation in China (pp.369-370). Shanghai People’s Publishing House.
Zhu, Z. Y. (2010). Financial pressure and official performance implications: A detailed study of local government investment and financing platform. High-Minded, (12), 30-35.
Qin, H. L. (2010). Financial risk financial, financial risk financially and economic growth. Shanghai Finance, (3), 17-22.
Liang, B. H., Huang, Y., & Li, Y. (2010). Comprehensive evaluation system of local government investment and financing platform. Economic System Reform, (4), 126-130.
Ma, H. T., & Qin, Q. (2010). Improving system construction, strengthening government investment and financing platform management. Economy and Management Research, (1), 33-41.
Hu, Y. C., & Zhang, W. J. (2011). The investigation of local government investment and financing platform. Reengineering Seeker, (8), 1-4.
Tang, Y. F. (2006). Research on the Expansion Mechanism of Local Government Debt in China-Based on the Analysis of Principal-Agent Theory. Financial Theory Series, (3), 54-59.
Wang, L. J. (2011). Research on government intervention and bank credit risk under the background of financial crisis. Financial Research, (5), 112-122.
Peng, X. Y., & Shi, H. Q. (2009) . Analysis of China’s credit expansion under moderately loose monetary policy. Economic Dynamics, (8), 45-49.
Pan, M., Miao, H. B., & Chen, X. M. (2011). Credit expansion behavior of Chinese commercial banks under financial rescue. Journal of Wuhan University, (3), 93-101.
Kornai, J., Maskin, E., & Roland, G. (2003). Understanding the soft budget constraint. Journal of Economic Literature, (41), 1095-1136.
Shleifer, A., Lopez-de-Silanef, F., & Shleifer, A. (2002). Government ownership of banks. Journal of Finance, (57), 265-301.
La Porta, R., & Vishny, R. (1994). Politicians and firms. Quarterly Journal of Economics, (4), 995-1025.
Perron, P. (1989). The great crash, the oil price shock and the unit root hypothesis. Econometrica, 57.
Achaya, V. V., Richardson, M., Vam Nieuverhurgh, S., & White, L. J. (2011). Guaraked as fail: Famie mae, fredie Mac, and the dehacle of martgage finance. Princton University Press.
Arhaya, V., Afono, G., & Kornoer, A. (2015). How do global banks Scranmble for liquility evidence from the asert-backed cometcial pager frcate of 2001. Journal of Financial Intermediation, forthcoming.
Wallison, P. J. (2012). How and why a U.S. sovereign debt crisis could occur. Econ Journal Watch, 9(1), 71-77.
Lane, P. R. (2012). The European Sovereign debt crisis. Journal of Economic Perspectives, 26(3), 49-68.
Robert, P., & Rotemberg, J. (1990). The excess co-movement of commodity prices. The Economic Journal, 100(403), 1173-1189.
Robert, P., & Rotemberg, J. (1993). The comovement of stock prices. Quarterly Journal of Economics, 108(4), 1073-1104.
Ser-Huan, P., Michael, R., & Tawn, J. (2003). Extreme value dependence in financial markets: Diagnostics, models, and financial implications. Review of Financial Studies, 17(2), 581-610.
Steven, R., & Sachs, J. (1998). The East Asian financial crisis: diagnosis, remedies, prospects. Brookings Papers on Economic Activity, (1), 1-90.
Correay, R., Sapriza, H., & Zlate, A. (2011). International banks and the cross-border transmission of business cycles. The Federal Reserve Board Seminar.
Roberto, R. (1998). Informational speculative attacks: Good news is no news (Report No. 4577). MIT Mimeo.
Roberto, R. (1999). On the Measurement of the International Propagation of Shocks (Report No. 7354). NBER Working Paper.
Roberto, A., & De Santis. (2012). The Euro Area Sovereign debt crisis: Safe haven, credit rating agencies and the spread of the fever from Greece. Ireland and Portugal (Report No. 1419). ECB Working Paper.
Ronn, E. I.,& Verma, A. K. (1986). Pricing risk-adjusted deposit insurance: An option-based model. Journal of Finance, 41(4), 871-895.
Cameron, R. (1997). Fully exploiting the information content of intra day option quotes: applications in option pricing and risk management. University of Arizona mimeo, 146.
Longstaff, F. A., & Schwartz, E. S. (1995). A simple approach to valuing risky fixed and floating rate debt. Journal of Finance, 50, 789-819.
Dedola, L., & Lombardo, G. (2009). Financial frictions, financial integration and the international propagation of shocks. ECB Working Paper.
Gentile, M., & Giordano, L. (2012). Financial contagion during Lehman default and sovereign debt crisis. Consob Working Paper.
Gentile, M., & Giordano, L. (2012). Financial contagion during Lehman default and sovereign debt crisis. CONSOB Working Paper.
Charles, M. (1975). Maximum score estimation of the stochastic utility model of choice. Journal of Econometrics, (3), 205-228.
Masson, P. R. (1998). Contagion: Monsoonal effects, spillovers, and jumps between multiple equilibria (Report No. 98/142). IMF Working Paper.
Ciccarelli, M., Maddaloni, A., & Peydro, J. L. (2012). Heterogeneous transmission mechanism monetary policy and financial fragility in the Euro area (Report No. 1527). ECB Working Paper.
Ganic, M. (2013). The EU debt crisis: A reflection on financial sector of the western Balkans. Journal of Business. Economics & Finance, 2(1), 51-64.
Merton, R. C. (1973). Theory of rational option pricing. Bell Journal of Economics and Management Science, 4 (Spring), 141-183.
Merton, R. C., & Bodie, Z. (1992). On the management of financial guarantees. Financial Management Journal, 21(Winter), 87-109.
Mullainathan, S. (1998). A memory based model of bounded rationality (Report No. 6779). University of Maryland Mimeo.
Cetorelli, N., & Goldberg, L. S. (2010). Global banks and international shock transmission: Evidence from the crisis (Report No. 446). Federal Reserve Bank of New York Staff Report, 145
Guraziu, R., & Zeqo, E. (2012). Sovereign debt crisis and its impact on world markets. IBDE - Integrating World Markets.
Dornbusch, R., Yung, C. K., & Claessens, S. (2000). Contagion: How it spreads and how it can be stopped. The WIDER Workshop on Financial Contagion.
Dornbusch, R., Yung, C. K., & Claessens, S. (2000). Contagion: Understanding how it spreads. The International Bank for Reconstruction and Development, 15(2), 97-177, 177-197.
Sachs, J., Tornell, A., & Velasco. A. (1996). Financial crises in emerging markets: The lessons from 1995. Brookings Papers on Economic Activity, (2), 3-15.
Peyrouse, S. (2012). The impact of the European debt crisis on the partnership with central Asia. Foreign Policy and Civil Society Program, 5.
Schmukler, S. L., Zoido, P., & Halac, M. (2005). Financial globalization, crises, and contagion. The Globalization World Bank Policy Research Report.
Claessens, S., & Forbes, K. (2004, November 15). International financial contagion: The theory, evidence and policy implications. The IMF’s Role in Emerging Market Economies: Reassessing the Adequacy of its Resources.
Rodrigo Valdés. (1996). Emerging markets contagion: Evidence and theory (Report No.5787). MIT Mimeo.
Valerie De Bruyckere., Gerhardt, M., & Schepens, G. (2012 September 3). Bank/sovereign risk spillovers in the European debt crisis. Working Paper.
Constancio, V. (2012). Contagion and the European debt crisis. ECB Working Paper, (16).
DOI: http://dx.doi.org/10.3968/10676
Refbacks
- There are currently no refbacks.
Copyright (c) 2018 xi lUO
This work is licensed under a Creative Commons Attribution 4.0 International License.
Share us to: 
Reminder
- How to do online submission to another Journal?
- If you have already registered in Journal A, then how can you submit another article to Journal B? It takes two steps to make it happen:
1. Register yourself in Journal B as an Author
- Find the journal you want to submit to in CATEGORIES, click on “VIEW JOURNAL”, “Online Submissions”, “GO TO LOGIN” and “Edit My Profile”. Check “Author” on the “Edit Profile” page, then “Save”.
2. Submission
- Go to “User Home”, and click on “Author” under the name of Journal B. You may start a New Submission by clicking on “CLICK HERE”.
We only use three mailboxes as follows to deal with issues about paper acceptance, payment and submission of electronic versions of our journals to databases: caooc@hotmail.com; ibm@cscanada.net; ibm@cscanada.org
Articles published in International Business and Management are licensed under Creative Commons Attribution 4.0 (CC-BY).
INTERNATIONAL BUSINESS AND MANAGEMENT Editorial office
Address: 1055 Rue Lucien-L'Allier, Unit #772, Montreal, QC H3G 3C4, Canada.
Telephone: 1-514-558 6138
Website: Http://www.cscanada.net Http://www.cscanada.org
E-mail: caooc@hotmail.com
Copyright © 2010 Canadian Research & Development Centre of Sciences and Cultures 
