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The time-varying characteristics of the Chinese financial cycle and impact from the United States

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  • Bo Wang
  • Haoran Li

Abstract

Although there have been many empirical studies about the financial cycle since the financial crisis of 2008, few have analysed the structural changes in the Chinese financial cycle over time. The Chinese financial development process is short, and it is difficult to obtain accurate results on the measurement of the financial cycle. Based on wavelet analysis, this paper analyzes the time-varying characteristics of the Chinese financial cycle and the relationship between the financial and business cycles. In addition, we measure the impact from the United States. This paper draws three conclusions. Firstly, in terms of the characteristics of cycles, the existence of Chinese business cycle and financial cycle is proved, while the credit cycle, leverage cycle, stock market cycle and property cycle are quite different. Specifically, China has a 5.8-year credit cycle, an 8-year stock market cycle, 3.4-year and 12-year business cycles and a 15-year leverage cycle. Secondly, the financial cycles can serve as leading indicators of the business cycle, though the relationships between them are change overtime. Finally, the United States has a significant impact on the Chinese financial cycle with a ‘decoupling-recoupling’ effect, which is mainly reflected in the leverage cycle and the stock market cycle.

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  • Bo Wang & Haoran Li, 2020. "The time-varying characteristics of the Chinese financial cycle and impact from the United States," Applied Economics, Taylor & Francis Journals, vol. 52(11), pages 1200-1218, March.
    • Handle: RePEc:taf:applec:v:52:y:2020:i:11:p:1200-1218
    DOI: 10.1080/00036846.2019.1659500
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    Cited by:

    1. Bošnjak Mile & Novak Ivan & Bašić Maja, 2021. "Capital Market Returns and Inflation Nexus in Croatia: Wavelet Coherence Analysis," Business Systems Research, Sciendo, vol. 12(2), pages 253-267, December.

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