China financial stability and asymmetric implications for economic stability

Lin Zhu () and Jian He ()
Additional contact information
Lin Zhu: Shihezi University
Jian He: Xinjiang University of Finance and Economics

Economic Change and Restructuring, 2024, vol. 57, issue 1, No 16, 29 pages

Abstract: Abstract This paper selects indicators from the macro-risk surface and incorporates them in the time-varying parameter factor augmented vector autoregression model to construct a financial stability index for China. It further uses the Bayesian Markovian switching vector autoregressive model to explore the asymmetric effect of financial stability on economic stability. This study shows that China’s financial stability has gradually improved over the past nearly two decades and is characterised by two regimes’ shifts between financial volatility and stability. Furthermore, the effects of financial stability shocks on economic stability variables are all significantly asymmetric. The financial stability period plays a stable and sustained role in promoting economic stability variables, while the stabilising effect of the financial volatility phase on economic variables is weakened. In addition, financial stability contributes more significantly to consumption stability than output, price and investment stability. This paper provides valuable references for policymakers to maintain financial and economic stability.

Keywords: Financial stability; Economic stability; TVP-FAVAR model; MS-VAR model (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10644-024-09590-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:ecopln:v:57:y:2024:i:1:d:10.1007_s10644-024-09590-4

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/10644/PS2

DOI: 10.1007/s10644-024-09590-4

Access Statistics for this article

Economic Change and Restructuring is currently edited by George Hondroyiannis

More articles in Economic Change and Restructuring from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().