Academic Journal of Business & Management, 2026, 8(4); doi: 10.25236/AJBM.2026.080403.
Shengyue Bao1, Jiawen Xu1
1Business School, University of Shanghai for Science and Technology, Shanghai, China
This article has made a time-changed system finance risk index (SRI) for China inside a factor-increased TVP-VAR frame. By making use of a data set which holds 38 macro-financial indicators, five hidden risk factors are extracted by means of principal component analysis, and therefore the model is estimated with the employment of Bayesian methods across the time period 2005-2025.The experiment outcome indicates that the index which we built can effectively catch big events of financial pressure, hence including the global financial crisis, hence the 2015 stock market turbulence, and hence the COVID-19 strike. In the factors that have been found out, the risk from outside part gets more and more noticeable as time goes by, this reflects that China’s contact with world financial situation becomes bigger and bigger. In addition, the relative weight of different risk origins shows obvious difference, thus it indicates that the framework of system risk changes continuously without stop. On the whole, the research results give new understandings about the changeable character of system risk in rising economies and thus emphasize the significance of bringing time change into risk measuring frameworks. The results also provide useful inspirations for the formulation of macroprudential policies that have the goal of advancing financial stability.
Systemic financial risk; TVP-VAR; Factor model; China; Macro-financial variables
Shengyue Bao, Jiawen Xu. Time-Varying Systemic Financial Risk in China: Evidence from a Factor-Augmented TVP-VAR Model. Academic Journal of Business & Management (2026), Vol. 8, Issue 4: 17-23. https://doi.org/10.25236/AJBM.2026.080403.
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