A Study of the Relationship between Systemic Risk and Economic Growth Based on Quantile Regression

Abstract

Abstract:

Under the background of new normal economy, this paper studies the relationship between systemic risk and economic growth in China based on quantile regression. Quantile regression can reflect the dynamic effect of economic growth itself and the heterogeneity structure of the relationship between systemic risk and economic growth in the whole sample distribution. The empirical results show that:firstly, when the level of economic growth is low, there is a significant negative relationship between systemic risk and economic growth. And the indicators of systemic risk, which represent the volatility, liquidity and vulnerability of financial institutions in the financial system, have an indicative effect on the decline of economic growth in the future. Second, strong links between financial institutions deepen recessions during recessions, and boost rapid growth during booms. Third, the coefficients obtained by ordinary linear regression underestimate the negative effects of systemic risk on economic growth in the period of low economic growth. During periods of moderate growth and prosperity, the coefficients obtained by ordinary linear regression and quantile regression are not significantly different. Fourthly, the systemic risk index constructed by principal component analysis is of great significance for the early warning systemic risk. Since 2017, systemic risk in China has been on the rise.

Key words: systemic risk, economic growth, new normal, quantile regression

Hu Yi, Li Rui, Zhang Xi, Li Jianping. A Study of the Relationship between Systemic Risk and Economic Growth Based on Quantile Regression[J]. , 2019, 31(12): 3-14.

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