An Analysis of the Bank Credit Marketization’s Effects on the Economic Fluctuation in China

Abstract

In recent years, more and more scholars began to emphasize the study of factors affecting macroeconomic fluctuations. As the bank credit market is a major part of the financial market in China, how bank credit marketization influences economic fluctuation has undoubtedly caused much attention. This paper mainly studies the role of bank credit marketization in the conductive process of macroeconomic fluctuations caused by real shocks and monetary shocks. According to the theoretical model created by Bacchetta (2000) and Beck (2006), this paper theoretically analyses the mechanism of bank credit marketization's effects. The results show that bank credit marketization amplifies real shocks but offsets monetary shocks in the conductive process of macroeconomic fluctuations. The government scale and the development of the stock market also have a significant influence on economic fluctuations. Based on the theoretical and empirical analysis, some policy recommendations are proposed.