Summary:
The effects of real sector leverage on the macro economy are of long-standing academic interest. Excessive real sector leverage exaggerates the true potential of economic growth. External shocks in the real sector amplify the financial system's vulnerability. High real sector leverage combined with the highly contagious and nonlinear effects of financial risks can adversely affect economic growth. In general, although scholars discuss the effects of real sector leverage and financial stability on the macro economy, some drawbacks exist in their assumptions. Excessive real sector leverage inevitably affects the growth of economies at various levels of development; however, the extent of this effect remains open to discussion, and no consensus has been reached yet. Besides debates concerning real sector leverage and economic growth, whether financial stability affects the correlation between real sector leverage and the macro economy is another matter of interest. Theoretically, financial stability is an important prerequisite for economic growth, and the effect of real sector leverage on the macro economy is inevitably affected by financial stability. However, two important questions exist: is the effect positive or negative？ And is the effect significant？ Clarifying the interactions among real sector leverage, the economy, and financial stability may help deepen our understanding of related issues. In addition, existing studies have considerable limitations with respect to research samples. Most of the foreign literature focuses on the United States, the eurozone, and other developed economies; by contrast, there is insufficient research on leverage in emerging economies, especially China. Domestic studies mainly focus on the effects of macro leverage on economic growth, mostly ignoring the heterogeneity of leverage across various sectors. Meanwhile, research on micro leverage mostly focuses on the leverage in a single sector and its influencing factors, without examining the effects of real sector leverage and financial stability on the macro economy from a global perspective. This study uses the dynamic panel data of 43 countries and regions from 2001 to 2020 as the research sample and employs the systematic generalized method of moments estimation method to empirically assess the effects of real sectors leverage on economic growth. A financial stability index is constructed to assess the moderating effects of financial stability on the correlation between real sector leverage and economic growth. The results reveal an inverted U-shaped relationship between real sector leverage and economic growth, and the inflection points differ between sectors. Further tests to uncover the underlying mechanisms show that household, enterprise, and government leverages affect economic growth through the channels of consumption, investment, and government expenditure, respectively. Improvements in financial stability can positively adjust the effects of real sector leverage on the macro economy and improve the inflection point. These findings have certain policy implications in terms of a country's economic growth and leverage control. Thus, it is necessary to fully consider the heterogeneity of the leverage of various sectors and refine the regulatory directions of real sector leverage to achieve dynamic balance under the dual goals of economic growth and financial stability. Compared with the existing literature, the marginal contributions of this study are mainly reflected in the following aspects. First,by incorporating the variables of real sector leverage, the heterogeneity effects of leverage in different sectors on the macro economy and the specific mechanisms are investigated, bridging the previous gaps caused by lack of relevant domestic studies. Second, this study explores the moderating effects of financial stability on the correlation between real sector leverage and the macro economy, providing useful empirical evidence for policy formulation, with the dual goals of economic recovery and financial stability.
龙海明, 吴迪. 实体杠杆对经济增长的影响研究——基于金融稳定的调节效应[J]. 金融研究, 2022, 506(8): 38-54.
LONG Haiming, WU Di. The Effect of Real Sector Leverage on Economic Growth: Based on the Moderating Effects of Financial Stability. Journal of Financial Research, 2022, 506(8): 38-54.
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