The Study of the Interaction of Long-Term and Short-Term Direct Finance and Indirect Finance
Date Issued
2008
Date
2008
Author(s)
Cai, Chong-Lu
Abstract
This paper investigates how business chooses the best capital policy based on its conditions and demand, under the concerns of capital cost and degree of difficulties. Hence, we verify the interaction among all kinds of financial behavior, furthermore, investigating how governmental monetary and debt policy affect long-term and short-term direct finance and indirect finance.bout the research mechanism, we examine the causality test between all kinds of financial factors at first, then do the VAR test to verify the interaction among them, and use the regression test to examine effects on other macroeconomic factors. Furthermore, we investigate effects on governmental monetary policy and expenditure due to public debt policy. The empirical model is derived from the quantitative method such as Unit Root Test, Granger Causality Test, Vector Autoregression Model.ollowing conclusions can be drawn from this empirical result:. Interaction among all kinds of financial behaviors: For the entire financial system, in terms of the time period, long-term finance leads short-term finance; in terms of the unitary financial system, long-term direct finance leads others and short-term direct finance lags behind. For the private finance, in terms of the time period, long-term private finance leads short-term private finance; in terms of unitary financial system, however, long-term private indirect finance leads others and short-term private direct finance lags behind.. Factors affecting long-term and short-term direct finance and indirect finance: Short-term direct finance is negatively impacted by increasing of loan rate and M2, but is positively impacted by short-term bills rate. Short-term indirect finance is positively impacted by Stock Price Index. Long-term direct finance is negatively impacted by loan rate and the amount of capital expenditure loan, but is positively impacted by short-term bills rate, however, the Chinese New Year’s holiday negatively affects the long-term direct finance. Long-term indirect finance is negatively impacted by loan rate and positively impacted by short-term bills rate and capital expenditure loan.. Government monetary policy effect and crowding out effect: In terms of the monetary policy, long-term private indirect finance is negatively impacted by central bank’s monetary policy, which shows that the loose monetary policy will long-term private indirect finance. In terms of crowding out effect, there is no significant relationship between public debt and private finance.
Subjects
financial liberalization
direct finance
indirect finance
crowding out effect
Type
thesis
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