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Quantifying the Effects of Financialization and Leverage in China

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  • Lixin Sun

Abstract

This article attempts to examine the effects of financialization and leverage on China’s economic growth and income inequality. The empirical results suggest that the effects of the financialization indicators are ambiguous and weak; however, the leverage indicators do have negative impacts. We find that the ratio of nonfinancial private debt to GDP has significantly negative impact on China’s growth, whereas the effects of the ratio of public debt to GDP are insignificant. Moreover, at the disaggregated level of nonfinancial private debt, it is the higher nonfinancial corporate debt level rather than the household debt level that remarkably undermines China’s economic growth. In addition, we have identified important threshold levels for several indicators of financialization. Finally, we find that the rise in the household debt level could significantly reduce the income inequality, and the ratio of M2 to GDP is positively related with the income inequality in China.

Suggested Citation

  • Lixin Sun, 2018. "Quantifying the Effects of Financialization and Leverage in China," Chinese Economy, Taylor & Francis Journals, vol. 51(3), pages 209-226, May.
    • Handle: RePEc:mes:chinec:v:51:y:2018:i:3:p:209-226
    DOI: 10.1080/10971475.2017.1398363
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    Cited by:

    1. Ewa Karwowski & Engelbert Stockhammer, 2017. "Financialisation in emerging economies: a systematic overview and comparison with Anglo-Saxon economies," Economic and Political Studies, Taylor & Francis Journals, vol. 5(1), pages 60-86, January.
    2. B M, Lithin & chakraborty, Suman & iyer, Vishwanathan & M N, Nikhil & ledwani, Sanket, 2022. "Modeling asymmetric sovereign bond yield volatility with univariate GARCH models: Evidence from India," MPRA Paper 117067, University Library of Munich, Germany, revised 05 Jan 2023.

    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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