Open AccessA Study on China’s Deleveraging and Financial Stability Under the Background of Financial Globalization
Author(s) -
Zhimin Zhang,
Xin Kai
Publication year - 2021
Publication title -
international journal of economics and finance
Language(s) - English
Resource type - Journals
eISSN - 1916-9728
pISSN - 1916-971X
DOI - 10.5539/ijef.v13n8p8
Subject(s) - globalization , leverage (statistics) , deleveraging , china , financial crisis , economics , financial system , financial analysis , financial risk , business , finance , financial intermediary , macroeconomics , market economy , political science , machine learning , computer science , law
This paper studies the impact of financial globalization and leverage ratio on China’s financial stability. After the 2008 financial crisis, maintaining the stability of the financial system is China’s core task. However, due to the increasing degree of China’s opening up policy, the risk of foreign shock is increasing. Meanwhile the domestic policy of deleverage is implemented, so the superposition of domestic and foreign situations aggravates the uncertainty of financial stability. Therefore, this paper selects the relevant variables to empirically study the real impact of financial globalization and leverage ratio on China’s financial stability through VAR model. The results show that the indicators of financial stability are most affected by their own inertia, and the deepening of financial globalization and the increasing of leverage ratio will have a positive effect on financial stability at the beginning, but in the later stage it fluctuates a lot. Based on the findings, the China government should put more emphasis on dealing with the relationship between leverage ratio, foreign risks and financial stability when making domestic financial policies.