An Analysis of Financial Stress in the Chinese Economy: A TVAR Approach
(2018) NEKN03 20181Department of Economics
- Abstract
- In this paper, we look to develop understanding of the nature and potential impact of financial stress and fiscal shocks in the Chinese economy, examining how such stress spreads through the economy and how monetary policy can exaggerate or mitigate the resultant effects. In order to do so, we construct a TVAR model on Chinese quarterly data. To achieve that we develop a financial stress index comprising of four distinct sub-indices, each covering a key sector of the domestic economy and designed with the specificities of the Chinese economic landscape in mind. The model shows that China experiences apparently cyclical periods of financial stress, resulting from both exogenous and endogenous sources, and the shock impulse analysis provides... (More)
- In this paper, we look to develop understanding of the nature and potential impact of financial stress and fiscal shocks in the Chinese economy, examining how such stress spreads through the economy and how monetary policy can exaggerate or mitigate the resultant effects. In order to do so, we construct a TVAR model on Chinese quarterly data. To achieve that we develop a financial stress index comprising of four distinct sub-indices, each covering a key sector of the domestic economy and designed with the specificities of the Chinese economic landscape in mind. The model shows that China experiences apparently cyclical periods of financial stress, resulting from both exogenous and endogenous sources, and the shock impulse analysis provides a dynamic illustration of how our chosen dependent variables of GDP growth, Inflation and CHIBOR react to shifts in the economic environment. We demonstrate how shocks which occur during the high stress regime typically produce a greater impact on the economy and discuss how policy responses to the occurrence of such shocks can be better guided. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/8959301
- author
- Landgren, Oskar LU and Crooks, Jack
- supervisor
- organization
- course
- NEKN03 20181
- year
- 2018
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Financial Stress, TVAR, Nonlinearities, China
- language
- English
- id
- 8959301
- date added to LUP
- 2018-09-24 14:19:00
- date last changed
- 2018-09-24 14:19:00
@misc{8959301, abstract = {{In this paper, we look to develop understanding of the nature and potential impact of financial stress and fiscal shocks in the Chinese economy, examining how such stress spreads through the economy and how monetary policy can exaggerate or mitigate the resultant effects. In order to do so, we construct a TVAR model on Chinese quarterly data. To achieve that we develop a financial stress index comprising of four distinct sub-indices, each covering a key sector of the domestic economy and designed with the specificities of the Chinese economic landscape in mind. The model shows that China experiences apparently cyclical periods of financial stress, resulting from both exogenous and endogenous sources, and the shock impulse analysis provides a dynamic illustration of how our chosen dependent variables of GDP growth, Inflation and CHIBOR react to shifts in the economic environment. We demonstrate how shocks which occur during the high stress regime typically produce a greater impact on the economy and discuss how policy responses to the occurrence of such shocks can be better guided.}}, author = {{Landgren, Oskar and Crooks, Jack}}, language = {{eng}}, note = {{Student Paper}}, title = {{An Analysis of Financial Stress in the Chinese Economy: A TVAR Approach}}, year = {{2018}}, }