China´s credit volatility: An analysis based on ARCH model

Reasonable pace of credit, not only can enhance the balanced growth and sustainability of the credit, but also promote economy develop sustained and steadily. In this paper, the ARCH model is applied to analyze the credit volatility in China market, and three ARCH model (GARCH, TGARCH, EGARCH) are estimated. The empirical results show that, China´s credit fluctuations exhibits significant ARCH effects, and which is suitable for establishing the GARCH, TGARCH EGARCH model of credit fluctuations. The GARCH model shows the persistent that credit fluctuations expose to external shocks is high; The TGARCH and EGARCH model indicates that credit fluctuations have asymmetric effects, and the fluctuations that “bad news” generate is greater than the “good news”. Then, this paper analyzes the macro-economic impact of the credit volatility briefly from four aspects. Therefore, we should pay attention to credit amount and structure changes, fully considerate the credit of strength, scope and rhythm, prevent ups and downs, and realize the balanced development of the credit markets.