Financial Development, Financial Structure, and Macroeconomic Volatility: Evidence from China

Feng Wei and Yu Kong
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Feng Wei: School of Economics and Business Administration, Chongqing University, Chongqing 400030, China
Yu Kong: School of Public Affairs, Chongqing University, Chongqing 400030, China

Sustainability, 2016, vol. 8, issue 11, 1-20

Abstract: Using annual data from 1997–2014 of 30 provinces, municipalities, and autonomous regions, subdividing trended and cyclical volatility of macroeconomics and inflation, considering different indicators of financial development and financial structure, this paper investigated the impact of financial development and financial structure on macroeconomic volatility. The empirical results found that (1) the trended and cyclical volatility of the previous macroeconomic period had a significantly positive impact on that of the current period, and the impact of trended volatility was greater than that of cyclical volatility; (2) financial development had a significantly negative impact on macroeconomic cyclical volatility through inflation cyclical volatility, but inflation trended volatility would amplify macroeconomic volatility; financial markets have no significant effect on macroeconomic volatility; financial structure measured with the ratio of stock market turnover and the efficiency of the financial development had a significant positive impact on macroeconomic cyclical volatility; and (3) inflation trended volatility had a significantly negative impact on macroeconomic cyclical volatility and trended volatility, while inflation cyclical volatility had a significantly positive impact on macroeconomic cyclical volatility.

Keywords: financial development; financial structure; macroeconomic trended volatility; macroeconomic cyclical volatility (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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