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China¡¯s Financial Market Risk: Macroeconomic Response and Crisis Warning

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  • Sha Zhu

Abstract

Financial stress index (FSI), as a financial risk measure, can timely reflect the risk of China¡¯s financial market with early warning function and forecasting ability. First of all, referring to the IMF index system, this paper constructs the pressure indicators of China¡¯s financial market, and then establishes the impulse response function of VAR (2,2) model with the main macroeconomic variables to analyze the impact of the FSI index on China¡¯s macroeconomic. The research conclusion shows that the financial stress index constructed in this paper has a lasting negative impact on China¡¯s major macroeconomic variables. At the same time, FSI can objectively and timely reflect the crisis warning of financial risk, and can also well correspond to the real economic and financial events that have happened already.

Suggested Citation

  • Sha Zhu, 2018. "China¡¯s Financial Market Risk: Macroeconomic Response and Crisis Warning," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(6), pages 12-19, June.
    • Handle: RePEc:ibn:ijefaa:v:10:y:2018:i:6:p:12-19
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    References listed on IDEAS

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    Cited by:

    1. Sha Zhu & Fujun Lai & Jie Deng & Qian Wang, 2021. "Do Mutual Funds’ Exposure to Financial Stress Predict Their Future Returns? Evidence From China," SAGE Open, , vol. 11(4), pages 21582440211, October.

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    More about this item

    Keywords

    financial market risk; financial stress index; macroeconomic response;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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