Financial Uncertainty,Corporate Default Risk and Macroeconomic Recession
Financial uncertainty refers to exogenous and unpredictable shocks in the financial market,whose economic impacts cannot be neglected.Therefore,studying the economic effects of financial uncertainty is of great significance to China's goal of stabilizing the economy.This article constructs a two-sector model including banks and enterprises,combining model derivation and numerical simulation to study the impact of financial uncertainty on economic downside risk and its transmission mechanism.The conclu-sions of the theoretical model are tested based on quantile regression.This article shows that:firstly,financial uncertainty has a significant negative impact on the output growth rate at the 5th quantile,known as the growth at risk,with its negative impact several times higher than that observed at other quantiles.This suggests that the increase in financial uncertainty exacerbates economic downside risk.Secondly,the increasing financial un-certainty may tighten bank credit conditions,affect the investment and production of enterprises,lead to an increase in the prob-ability of corporate bankruptcy default,and then exacerbate the economic downside risk.What's more,the increase in corpo-rate default risk will further amplify the negative impact of financial uncertainty on the economic downside risk.Thirdly,falling housing prices will exacerbate the negative impact of financial uncertainty on downside risks to the economy.Regarding how to address the negative impacts of financial uncertainty on economic downside risk,this article gives three suggestions.Firstly,strengthen the financial uncertainty monitoring and management system,especially enhancing the capabili-ties of forecasting,analyzing,and responding to financial uncertainty.Secondly,flexibly utilize various financial policy tools to effectively handle post-event responses,particularly paying more attention to the risks of capital flow disruption and default risks in the corporate sector caused by financial uncertainty.Thirdly,it is necessary to focus on housing price fluctuations and coordinate with real estate regulatory policies in a timely manner to maintain stable housing prices.
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