Financial Stability or Instability? Impact from Chinese Consumer Confidence

Shi-Qi Liu (), Xin-Zhou Qi (), Meng Qin () and Chi-Wei Su ()
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Shi-Qi Liu: Qingdao University, School of Economics, No. 308 Ningxia Rd., Qingdao, Shandong, China
Xin-Zhou Qi: Corresponding Author. Qingdao University, School of Economics, No. 308 Ningxia Rd., Qingdao, Shandong, China
Meng Qin: Party School of the Central Committee of the Communist Party of China (National Academy of Governance), Graduate Academy, No. 100 Dayouzhuang, Beijing, China
Chi-Wei Su: Corresponding Author. Qingdao University, School of Economics, No. 308 Ningxia Rd., Qingdao, Shandong, China

Journal for Economic Forecasting, 2019, issue 4, 25-43

Abstract: This paper attempts to study the dynamic causal relationship between Chinese consumer confidence and financial stability by using a sub-sample time-varying rolling window test. Through empirical research, it is proved that consumer confidence improves the stability of the financial market, ensure the smooth operation of the financial system, and reduce the possibility of financial risks. Similarly, financial stability has a positive impact on consumers. Due to the government's intervention in the economy, the financial market is relatively stable, thus consumers are full of confidence in the market. Therefore, we find that the causal relationship between consumer confidence and financial stability is consistent with financial system volatility model, which contributes to the stability of financial markets and the reduction of financial crises. This finding helps monetary authorities maintain financial stability by increasing consumer confidence and making the most effective decisions based on economic trends.

Keywords: consumer confidence; financial stability; bootstrap; rolling window; causality; time-varying (search for similar items in EconPapers)
JEL-codes: C32 D81 E32 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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