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Financial Stability or Instability? Impact from Chinese Consumer Confidence

Author

Listed:
  • Shi-Qi LIU

    (Qingdao University, School of Economics, No. 308 Ningxia Rd., Qingdao, Shandong, China)

  • Xin-Zhou QI

    (Corresponding Author. Qingdao University, School of Economics, No. 308 Ningxia Rd., Qingdao, Shandong, China)

  • Meng QIN

    (Party School of the Central Committee of the Communist Party of China (National Academy of Governance), Graduate Academy, No. 100 Dayouzhuang, Beijing, China)

  • Chi-Wei SU

    (Corresponding Author. Qingdao University, School of Economics, No. 308 Ningxia Rd., Qingdao, Shandong, China)

Abstract

This paper attempts to study the dynamic causal relationship between Chinese consumer confidence and financial stability by using a sub-sample time-varying rolling window test. Through empirical research, it is proved that consumer confidence improves the stability of the financial market, ensure the smooth operation of the financial system, and reduce the possibility of financial risks. Similarly, financial stability has a positive impact on consumers. Due to the government's intervention in the economy, the financial market is relatively stable, thus consumers are full of confidence in the market. Therefore, we find that the causal relationship between consumer confidence and financial stability is consistent with financial system volatility model, which contributes to the stability of financial markets and the reduction of financial crises. This finding helps monetary authorities maintain financial stability by increasing consumer confidence and making the most effective decisions based on economic trends.

Suggested Citation

  • Shi-Qi LIU & Xin-Zhou QI & Meng QIN & Chi-Wei SU, 2019. "Financial Stability or Instability? Impact from Chinese Consumer Confidence," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 25-43, December.
    • Handle: RePEc:rjr:romjef:v::y:2019:i:4:p:25-43
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    Citations

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    Cited by:

    1. Massimo Arnone & Angelo Leogrande & Alberto Costantiello & Lucio Laureti, 2024. "Banking Stability in the ESG Framework Across Italian Regions," Working Papers hal-04647121, HAL.
    2. Umair Bin YOUSAF & Khalil JEBRAN & Man WANG, 2022. "A Comparison of Static, Dynamic and Machine Learning Models in Predicting the Financial Distress of Chinese Firms," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 122-138, April.
    3. Xin-Zhou Qi & Zhong Ning & Meng Qin, 2022. "Economic policy uncertainty, investor sentiment and financial stability—an empirical study based on the time varying parameter-vector autoregression model," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 17(3), pages 779-799, July.

    More about this item

    Keywords

    consumer confidence; financial stability; bootstrap; rolling window; causality; time-varying;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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