Contribution of the Optimization of Financial Structure to the Real Economy: Evidence from China’s Financial System Using TVP-VAR Model

Xiaoye Liu,Kedong Yin,Yun Cao

doi:10.3390/math9182232

Abstract

How the financial structure promotes the development of real economy has always been a research topic in academia. By analyzing the characteristics of China’s financial system, this paper constructs the Finance Structure Index (FSI) from the perspectives of structural efficiency, financing structure and industry structure, and interprets the trend of the FSI. Based on the quarterly data of China from 2004 to 2020, this paper constructs a time-varying parameter-vector autoregression (TVP-VAR) model to study the dynamic impact of finance structure on the growth and optimization of the structure of the real economy. The empirical analysis results show that the response of the real economy has time-varying characteristics. Early on, financial structure has a promotion effect on the scale of the real economy, but the impact on the structure is not clear. In the middle, the effect of promoting the scale decreases slightly and then rebounds rapidly, while the optimization of the structure is inhibited. Later, it has a significant promoting effect and an obvious time-lag effect. Moreover, the impact of the financial structure is unstable. It is necessary to improve the efficiency and quality of the transmission of the optimization of the financial structure to the real economy.

Highlights

IntroductionThe structure of China’s real economy has shifted from labor intensive to capital and technology intensive [1]
There is no doubt about the achievements of China’s rapid economic development
This paper summarizes the research results and methods used by scholars, and further analyzes and characterizes the time-varying characteristics of the dynamic influence of finance structure on the scale and structure of real economy

Summary

Introduction

The structure of China’s real economy has shifted from labor intensive to capital and technology intensive [1]. The optimization and upgrading of the structure of China’s real economy is the only way to do this. It cannot promote the upgrading of the structure of the real economy and realize the long-term development of the real economy if it only relies on the growth of the finance scale [3]. The exploration of ways for financial development to promote the development of real economy must start with the finance structure [4]. Exploring how the finance structure affects the optimization of the structure of the real economy is the key to improving the development potential of the real economy [5]

Methods

Findings

Discussion

Conclusion