Financial Heterogeneity, Financial Channel and the Short-term Fluctuation of China's External Imbalances: a Threshold Effect Analysis Based on G20 Data
LIU Wei, HUANG Xiaoqi, GUO Xiaobo
School of Economics and Management, Wuhan University
Abstract:
Based on the panel threshold model by Hansen, this paper studies on the non-linear effects of financial channel from the perspective of heterogeneity with short-term imbalance index and G20 data. The results show that:the domestic private sector bank credit/GDP、equity investment net inflow/GDP and bank loan-to-deposit ratio, which represent the differences in financial market structure, and the total reserves/GDP that represents differences in financial interventions, these four cause a threshold effect about financial channel regulating imbalance, but the effect caused by financial openness is non-significant. Conclusion above can be used to explain the differences of financial channel utility between China and the U.S. China should adjust the financial market structure, lower financing of banks, improve return on outflow investment, appropriately reduce official reserves, to enhance the effectiveness of financial channels.
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