An Analysis of the Determinant for Financial Stability in China

Abstract

Financial stability is a critical aspect of any economy, and it is essential for sustainable economic growth. This study analyzes the determinants of financial stability in China using the method of Ordinary Least Squares (OLS). The study uses data spanning from 2012 to 2020 and covers various indicators, such as economic growth, inflation, interest rates, and real effective exchange rate. The study aims to identify the factors that are most significant in determining financial stability in China and to provide insights into how policymakers can maintain and enhance stability in the financial system. The results of the OLS analysis indicate that economic growth, inflation, and interest rates have a significant impact on financial stability in China. Government policy, including regulatory measures and the fiscal stance, also plays an essential role in promoting financial stability. Additionally, the study finds that external factors, such as global economic conditions, can also affect financial stability in China. Overall, the findings suggest that a comprehensive approach to maintaining financial stability is necessary, which includes sound macroeconomic policies, effective regulation, and monitoring of external risks.