Based on dynamic panel data of 68 major economies over the period of 1981-2012, this paper investigates the impact of financial cycle and financial volatility on economic growth and financial stability. The empirical results show that the boom and recession phases of the financial cycle are often associated with lower economic growth and higher probability of financial crisis. By comparison, in the normal phase of the financial cycle, economic growth is higher and the financial system is more stable. This indicates that both the overheating and overcooling of the financial system is harmful to economic growth and financial stability, and the reverse is true vice versa. In addition, no matter what phases the financial cycle is in, larger financial volatility is always associated with lower economic growth and higher probability of financial crisis, suggesting that the increase in financial volatility is harmful to both economic growth and financial stability.

With data collected from 230 cities in China, this paper analyzes the spatial spillover effect and its regional boundary of producer services’ spatial aggregation on the manufacturing productivity. Research takes advantage of spatial econometric model in which the economic geographic distance is a spatial weight matrix. The empirical result shows that the space spillover effect is significant and there is a certain regional damping boundary of the spatial spillover effect. We find out that the dense area of spatial spillover is within 200 km and 500 km is the halving-effect distance. Provincial boundaries have certain negative effects on space spillover effect.

This paper discusses the ethic basis of inclusive finance by analyzing the history of economics and policy, and concludes that inclusion roots from human beings’ consensus on equality and fraternity. And in detail, the ex-ante and ex-post heterogeneity leads to inequality in resource allocation, income distribution and wealth redistribution, and thus, inclusive finance means a kind of correction method. Meanwhile, this thesis also finds that the transfer from advantage side to disadvantage side is unsustainable, and the Club Theory is much more feasible for inclusive finance, because of the cooperation occurring only among those of similar endowments. Above findings give ethic foundations for the reconstruction of China’s inclusive financial system.

As an extreme phenomenon, price crash is common and influential in financial markets and plays an important role in asset pricing. This paper studies systematic crash risk in China stock market. The empirical results suggest that there is a significantly positive relationship between systematic crash risk and expected return, and after hedging the highest and lowest risk portfolio, the annual excess return is 8.86%. This paper also provides evidence that investors’ lottery preference and lucky number preference significantly affect the relationship between them. This paper has important implications for investment decision, risk management, and understanding the behavior of investors.

Air quality may affect stock market participants and ultimately affect stock market through the channels of emotion, policy and expect. This paper empirically analysis the key problem of whether and how the air quality affects stock market with the Shanghai air quality index and Shanghai listed companies’ stock prices index data from 2006.1.4 to 2013.1.14 using multivariate progressive methods. The empirical studies find the air quality has influences on the stock market returns, turnover rate and volatility. The emotion and other channels of the air quality’s effect on stock market exist. The good air quality tends to lead stock market get higher returns, lower turnover rate and volatility. The impact of air pollution is symmetry to good air quality. Robustness based on mixing frequency regression tests can rule out the possibility of endogenous.

This paper attempts to discuss the sustainability of global economic growth within the framework of endogenous growth theory. Although the global economy remains sluggish and many short-term problems are yet to be resolved, we should realize that the endogenous economic forces, among which knowledge accumulation and human capital accumulation are of the utmost significance, are capable of pushing the economy forward. By implementing carefully designed policies and rules that enhance human capital and stimulate innovations, China will be able to set the wheel of sustained growth in motion and transform into the world knowledge center. For this to happen, China needs to attract global talents.

This paper rethinks the imperfectness of the theories and policies on promoting capital account opening by examining the financial performance of China’s cross-border capital flows. We argue that no empirical evidence would support capital flows’ welfare effects, and making policies based on this theory might get developing countries into trouble. The policy called managed convertibility which arises from practices in China can be widely applied to developing countries. Developing countries should strive for a greater say in setting international rules of opening capital account, and improve the influence of capital flow management measures. To realize capital account convertibility is China’s target, but convertibility reform needs a process of dynamic optimization.

The improvements of monetary policy system face the new challenges in the developments of macroeconomic policy, which adapt and lead the new normal economy. The ultimate targets of monetary policy will be diversification and it should be more difficult for balancing the ultimate targets. The central bank should improve the abilities of balance and transition between the quantity targets and the price targets on the choice of intermediary targets and operation targets. Medium-short-term policy instruments benefit the economic growth in short term, but in long term, central bank should consider the term mismatch between medium-short-term policy instruments and the long term targets, the market mechanisms of policy instruments, and the optimization of instrument portfolios. The transitions of monetary policy operation face the problems, which are the transition from discretion to rule, choices of operation timing and quantity, and the choice of interest rate control modes. The monetary policy transmission mechanisms will be more complicated and the effects will be uncertain. Realizing the functions of monetary policy in new normal economy objectively and improving the independence of central bank should benefit in solving the problems facing by central bank under the new normal economy.

Currency policy adjustment on August 11 of 2015 implies another important step taken for making RMB exchange rate regime to be more market determined. Further reform in RMB exchange rate formation mechanism must respect law of value which means the market price is driven by the fair value but fluctuated around it. The reform should be kept at the market-oriented path. The Authorities should adhere to the belief in strong RMB which should not be misled by market expectation. The market participants must overcome fear of floating and adapt themselves to regular and frequent two-way movement of RMB exchange rate. Meanwhile, the central bank would keep the proper right to step into the market when the market exchange rate witnesses excessive volatility in short-term or persistent deviation from its equilibrium level.

Facing the deflation risk in China, we study the causes, including the descending period of economic cycle, high leverage ratio, dropping of asset prices, excess production capacity, the anticipation of depreciation on RMB, falling of international commodity prices. We also point out that to confront deflation risk, we should coordinate the relationship of management of demand and reform of supply, implement more positive fiscal policy and effective monetary policy, promote the constitutive innovation, and improve the international coordination of macro policies.

With the development of wealth-management, funds and trusts, it has become a new normal pattern of money, credit and asset-management to be the three pillars in financial markets. The redundancy absorption effect of asset-management market plays an important role in the formation of balanced interest rate and its reasonable structure. However, the market-oriented pricing mechanism and risk clearing channels of the asset-management market have not been completely established yet, therefore, its trajectory presents to be “Nossem Curve”. Asset-management will be one of the most important forces in financial industry, and thus diversified and multi-layered construction of the asset-management market is the best way of achieving the equilibrium of interest-rate spread.

The coexistence of formal finance and informal finance in financial market has made the operation and transmission of the monetary policy instruments more complicated and non-controllable. The paper attempts to put informal financial sector into the research framework, and establish a DSGE model for comparing the effectiveness of quantitative monetary policy instruments and price-based monetary policy instruments. The research has shown that price-based monetary policy instruments have greater effect on output, wages and capital accumulation than quantitative monetary policy instruments, and the duration is relatively short with a slight rise in inflation. On the impact of the informal financial sector, price-based monetary policy instruments have more significant effect.

The close relation between government and the state-owned enterprises, and government financing platform expansion, significantly strengthen the non-Ricardo character of China's fiscal policy, which makes the present value budget equation an equilibrium condition of macro economy. We conclude that stock price negatively correlates with the change of the general price, and it can also be deduced that CPI changes lead to PPI. Based on structural change test on the data from January 1997 to March 2015, we find that the relationship of the stock price and the general price in April 2002~January 2005, and July 2009~March 2012 supports our theory description.

This paper investigates whether there are asymmetric effects between monetary policy, shadow banking and risk-taking in China. We find monetary policy does affect shadow banking's risk-taking asymmetrically, and the comovement between the tightening money supply and the low interest rate in the mid and long term strengthens the shadow banking's risk-taking.In addition, the investment of shadow banking system has changed in the field of the real estate, and the economic downturn will increase the risk clustering of shadow banking system.For policy,shadow banking can function efficiently by enhancing the interest rate mechanism, broadening the financing channels and building a comprehensive monitoring of the shadow banking platform.

After the international financial crisis, the “shadow banking” has become the focus of global financial regulation and academia research, but lack of study on its behavior model. This paper presents a “shadow banking” analysis of the conception, risk characteristics and differences between native and foreign institutions. Based on the theories of behavioral finance, this study selects fundamental factors affecting the behavior of shadow banking, summarizes behavioral characteristics, refines their behavioral variables and constructs behavior conceptual model. Then this study converts conceptual model into the mathematical model and uses Monte Carlo method with SAS software to conduct data simulation and scenario analysis. The targeted policy suggestions are listed for regulators to effectively implement regulation and control systemic risk of shadow banking.

This paper takes the Eurozone debt crisis for analyzing the conduction effects of the sovereign credit risk. On the one hand, we take for the “PIIGS” ten-year bond spreads relative to Germany, analyze the risk conduction effect within the Eurozone; on the other hand, based on GVAR model, it studies the reaction of the world's major economies to the Eurozone shocks, such as the fluctuations of Eurozone GDP. The results show that Greece and Ireland have more significant cumulative impacts on the other countries than Spain and Italy; among the Cross-border conduction of sovereign credit risk, the impacts of the Euro zone economy shrinking have very great effects on its Major trading partners-UK, US and China.

Using the credit reporting system as an example, this paper quantitatively evaluates the impact of financial infrastructure on China’s economy. Specifically, we build a quantitative framework to analyze the raw data of the credit reporting system and survey data from national banks and local financial institutions. Our quantitative analysis finds that the credit reporting system has a positive impact on consumption and investment,which accounts for 4.28% of GDP growth in 2012, equivalent to 0.33 percentage points of the growth rate.

The loopholes and shortcomings of China's current government cash management system has become an important hidden-peril which threatens the safety and performance of public money. It is in urgent need of locking the standard TSA(Treasury single account) and two nonstop payments –the direct payment to the TSA and the direct payment by the TSA to beneficiary, to further optimize the system in four key aspects: the framework of accountability, the daily centralization of cash balance and transaction records, the arrangement of bank and the structure of account, the supporting mechanism. The agenda of the reform should focus on the four priorities: to completely abolish and strictly limit such transitional accounts as special financial accounts, to replace the advances-liquidation mode with the direct payment by the TSA, to establish the internal control process of monitoring the real-time cash flow cycle, one-by-one and through the whole course, to construct the information disclosure mechanism of the cash management performance. These efforts should be taken as the core of public budget reform, which aims at eliminating the basic fragility, and be combined with the efforts of strengthening the financial regulation of central bank and improving the monetary policy.

This paper focuses on China’s Subnational Government Debt Paradox, analyzes its overborrowing mechanism by using the fiscal decentralization theory. On the basis of expounding the meaning and the form of soft budget constrains,we analyse the SOE debt crisis in the 1990s and the current case of subnational government’s overborrowing,theoretically explain why the debt crisis repeated and describe its procyclicality.