【Abstract】“Bringing the finance back in” is the mission of the new paradigm of macro analysis. From the study of the financial cycle emphasized by the Bank for International Settlements, the research of the financial network promoted by the European Central Bank, and the macro-financial linkage framework established by the International Monetary Fund, all aim to better explore the correlation and propagation effects between macroeconomy and finance, in order to build the “financial pillar” of macroeconomics. Although these studies lack the support of more mature theoretical models, their application in policy analysis has made practice ahead of the theory, thus preparing conditions for the formation of a new theoretical paradigm. The enlightenment of the global financial crisis to policy makers is that the financial environment can provide valuable information for future growth risk, thus laying the foundation for taking precise preventive measures. Macro-financial linkage analysis, especially the indicator of growth-at-risk (GaR), actually provides a new approach for discussing steady growth and risk prevention in a unified framework. This paper discussed the relationship between China’s financial environment (risk) and economic growth using the GaR model. We first constructed indexes reflecting financial conditions, macro-financial vulnerability, and external environment with a large number of basic indicators. We further examined the impact of these indexes on the probability distribution of economic growth, including both growth expectations and tail risks of growth. The empirical analysis shows the following results. (1) China’s financial environment and macro-financial vulnerability both have significant negative effects on economic growth. Either in short-term or in long-term, the negative impact of macro-financial vulnerability is more severe and more significant than that of financial conditions. (2) The empirical analysis based on the policy response to the 2008 global financial crisis and the supply-side structural reforms starting in 2015 show that although loosening (tightening) policies promote (suppress) short-term economic growth, they will inhibit (promote) the growth potential in the long-term, which is mainly due to the increased financial imbalances and macro-financial vulnerabilities caused by short-term loosening policy. (3) Under the current exogenous impact of the COVID-19 pandemic, the short-term growth is expected to decline significantly, while the long-term growth is not much affected. The previous supply-side structural reforms also provide a large space for the current countercyclical policy. Based on the above findings and against the backdrop of the COVID-19 pandemic, we should maintain the dynamic balance between steady growth and risk prevention. First, taking “to be or not to be” issue as the top priority, and never forgetting the risk of the “surging floods” of unlimited quantitative easing. Second, the indicator of GaR can be introduced to provide a new perspective and reference benchmark for stabilization policy. Third, since more risk accumulated in the public sector, it is necessary to promote the market-based risk sharing mechanism, among which the development of private sector is crucial.

【Keywords】 growth-at-risk; financial risk; economic growth; macro-financial linkage;

【DOI】