Abstract
In recent years, more and more funds circulate internally in the financial field, which is called “financial hoarding”. After calculations, the scale of China’s financial hoarding was 242,178 billion yuan in the first quarter of 2003 and jumped to 1,801,706 billion yuan in the fourth quarter of 2016, which increased by nearly 7.4 times in the past 14 years and accelerated after 2014. The phenomenon that large amounts of money deviate from the real economy to virtual economy is called “shift from real economy to virtual economy”. The large scale of financial hoarding will inevitably influence the economic growth in China. Does financial hoarding promote or inhibit the economy? Does the relationship change with the economic growth rate? To address this issue, this paper first provided theoretical analysis of the relationship between financial hoarding and economic growth. Then, it used the data of the first quarter of 2003 through the fourth quarter of 2016 in China for empirical analysis. The results revealed two facts. Firstly, the simultaneous equations model showed that financial hoarding and economic growth promote each other in the long run and financial hoarding can be conducive to economic growth. Secondly, the MS-VAR model showed that the relationship between financial hoarding and economic growth changed with the economic growth rate. In addition, financial hoarding had a positive effect on the economic growth under both medium and high economic growth regimes, but to a greater extent in high economic growth regimes.
Highlights
China is a country with a tradition of a high savings rate, and, there is a lot of cash hoarding
Contrary to previously existing analyses, this article studied the relationship between financial hoarding and economic growth directly
This article took the real situation into accord, explored the relationship between financial hoarding and economic growth change with growth rate changed
Summary
China is a country with a tradition of a high savings rate, and, there is a lot of cash hoarding. With the development of the financial market, residents can invest in stocks, bonds, and other financial assets to obtain higher returns than those of savings, or they can maintain and increase the value of assets by investing in real estate properties, which are about to increase in price. The deterioration of a real economy environment makes enterprises choose to invest in financial assets such as stocks, so that the money flows into the financial sector. The funds constantly flow out from the real economy, leading to the "hollowing out" of the real industry. This phenomenon is called “shift from real economy to virtual economy”. A large amount of funds flows into the virtual economy, which results in sharp fluctuations in the stock market, high price of real estate, and other serious impacts on the economy. The relationship between finance and economy has gradually become a problem for people from all fields
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