FINANCIAL CYCLES IN THE ECONOMY AND IN ECONOMIC RESEARCH: A CASE STUDY IN CHINA

This work explores the relationship between financial cycles in the economy and in economic research. To this aim, we take China as an empirical example, and an intuitive bibliometric analysis of selected terms concerning financial cycles in economic research is performed first. Both in the economy and in economic research, we then conduct singular spectrum analysis to further isolate and describe the specific length and amplitude of financial cycles for China based on quarterly time-series data. Finally, according to the estimated cycles that detrended by Hodrick-Prescott filter for financial and bibliometric variables, the Granger causality test scrutinizes the results of the first two steps. Moreover, a time-varying parameter vector autoregression model is estimated to quantitatively investigate the time-varying interaction between financial and bibliometric variables. Our study shows that financial cycles have a strong effect on the developments in the financial-related literature. In particular, the 2008 global financial crisis’s impulse intensity is significantly higher than in other periods. Surprisingly, discussions on financial cycles in the literature also have an impact on financial activities in real life. These findings contribute to nascent work on the patterns in financial cycles, thus providing a new and effective insight on the interpretation of financial activities.

Financial Structure, Cycle, and Instability

The subprime loan mortgage crisis has revived scholarly interest in Minsky’s financial instability hypothesis. The related mathematical models present two types of Minskian financial structures. We construct macrodynamic models that consider both structures and discuss financial instability and cycles. We also demonstrate that one of the financial cycles occurs when a real factor stabilizes the economy. The burden of interest-bearing debt is an important determinant of the cycle. We posit that the escalating financial fragility in this cycle is a more appropriate interpretation of the Minskian financial structure that refers to hedging, speculative and Ponzi behaviors. We further demonstrate that another financial structure destabilizes the economy. If the instability occurs at the point of fragility, then the economy may deteriorate into financial crisis. Fragility then becomes instability.JEL classifications: E12, E32, E33, E43

INCREASING THE EFFICIENCY OF THE USE OF PUBLIC FINANCIAL RESOURCES IN ENSURING EMPLOYMENT OF THE POPULATION

The paper reveals the essence of the system of public financial management (PFM), defines its key elements of the PFM system, and articulates goals and objectives in enhancing employment. The authors definition of PFM is given. A comparative analysis of managerial financial cycles in the public and private sectors of the economy is carried out. The historical aspect of the PFM reforms is also analyzed, and various approaches to financial management (income and expenditure) in the public sector are studied and suggested better ways to improve the busyness of the population. Factors influencing the effectiveness of the PFM reforms are revealed. The challenges faced by financial managers in implementing public finance reforms are analyzed, and the opportunities that can be used to achieve the objectives of the PFM system, some of which are simultaneously challenges are analyzed.

Leaning against the Wind and Crisis Risk

Can central banks defuse rising stability risks in financial booms by leaning against the wind with higher interest rates? This paper studies the state-dependent effects of monetary policy on financial crisis risk. Based on the near-universe of advanced economy financial cycles since the nineteenth century, we show that discretionary leaning against the wind policies during credit and asset price booms are more likely to trigger crises than prevent them. (JEL E43, E44, E52, E58, F33)