MA Yong, SU Xiaojian, ZHANG Zhengjun
In the context of China's emphasis on “maintaining the bottom line of no systemic financial risks”, this paper examines the impact of industry bubbles on systemic risks contribution from an industry perspective. Furthermore, we construct inter-industry risk networks to identify the risk sources under different levels of systemic shocks. This provides effective policy references for deepening the reform of the new development pattern in which the domestic grand cycle plays a leading role. The empirical results indicate that, apart from the promoting effect of asset price bubbles in the Agriculture, Water, Environment, and Utilities Management, and Culture, Sports, and Entertainment industries, the impact of most industry bubbles on the systemic risk contributions of firms within those industries is either insignificant or inhibitory. However, when investor sentiment is high, the systemic risk of companies within the industry increases during a bubble period. In the cumulative effects of the local projection model, the promoting effect of bubbles in most industries shows a sustained upward trend, with the cumulative effect of promotion being heterogeneous. In the quantile risk network, industry connections tighten during extreme shocks compared to normal periods. Additionally, the risk defense capabilities of each industry vary depending on the intensity of systemic shock. Besides, the risk sources in industry bubble networks are predominantly in the Agriculture, Manufacturing, Transportation, Catering, and Leasing industries. This implies that risk shocks propagate outward, revolving around production, distribution, circulation, and consumption as the core, indicating that China's economy is transitioning towards a new development pattern centered on the domestic grand cycle.
