Abstract:
The international practice proves that financial systemic risks not only damaged financial stability but also imposed great losses to economy and social wealth. The international financial crisis happened in 2008 has been attacking the global financial market and real economy permanently, under the background of external risks spill-over effects and prominent characteristics of transition economy of China itself, cyclical and structural problems overlaps, China’s real economy and financial system face worse risks which are emerging gradually. How to set up an approach to monitor and calibrate financial systemic risks so as to identify and prevent risks is a very important and imminent task. The essay tries to learn from international and domestic latest studies and practical achievements, and makes a deep research on the area which has not been explored thoroughly. It categorizes the systemic financial risk into external and internal factors by analyzing the causes, transmission and propagation mechanism of systemic financial risks. It figures out the transmission mechanism as internal and cross-border transmission, and categorizes propagation mechanism into credit crunch, liquidity crunch and asset price fluctuation mechanism. Based the comparison of different alarm and monitoring methodologies, and the analysis of the features of Chinese systemic financial risk, it recommends that China should adopt the synthetic index method to build the systemic financial risk monitoring and calibrating system. The synthetic index model was build based on the historical data of the Chinese market, adopting the Markov switching model which is not only able to assess the entire risk, but also able to dig into detail in specific areas, thus being able to bridge macro-prudential and micro-prudential lenses. The synthetic index model also adds an index correction mechanism to better fit into the very dynamic Chinese financial market.
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