The"Feedback Loop"Between Fiscal Risk and Financial Risk under the Impact of Public Health Emergencies
In recent years,the interaction or"feedback loop"between fiscal and financial risks has become increasingly apparent.Based on the impact of the public health emergencies,this paper studies the mutual transmission and accumulation between fiscal risk and financial risk and its impact on the economy by constructing a four-sector DSGE model.In the model,we introduce the government's rescue of bank losses,the bank's repayment of rescue funds and the structure of government bonds held by banks.We simulate the cyclic accumulation of risks by setting the repayment parameters of rescue funds by banks,and compare fiscal risks with financial risks using rational expectations.The results show that:(1)There exists a"feedback loop"structure between fiscal risks and financial risks.It has led to the transmission and accumulation of risks between the two sectors,exacerbating government debt problems and financial fragility.(2)The close connection between government departments and banking departments is the main reason for the accumulation of risk cycles,and the weak initiative of banks leads to their passive position in risk resolution,mainly relying on the government to solve it.(3)Policies such as adjusting the term of government bonds,incorporating implicit bank debt into the medium-term budget,or establishing a capital protection buffer zone can significantly improve the risk resistance capabilities of the government and banks.
Public Health EmergenciesFiscal RiskFinancial RiskFeedback Loop
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