The context of expanding domestic demand, investment demand Empirical Analysis of factors affecting papers :1979-2009_ Network

Paper Net: Abstract: Based on the reality of expanding domestic demand, background, using 1979-2009 data in the macro, from the perspective of empirical analysis of the domestic market in China the main factors affecting Investment demand, results showed that, Nationwide, only output of significant Investment demand positive impact, consumption, price levels and interest rates influence was not significant, while in the eastern Zhejiang Province, represented by region, in addition to the interest rate variables, output, consumption, price level Investment needs are significant and positive correlation between the country and the factors affecting Investment demand, Zhejiang Province, the differences are to some extent reflects the income gap between the level of the market and the Investment structure of Investment demand and other factors may have an indirect impact on the formation of potentially .

Keywords: domestic demand, Investment demand, consumption, price levels, interest rates

I. Introduction

Based on the financial crisis after the background and context of the policy of expanding domestic demand, domestic market from the point of view to analyze the main factors affecting Investment demand in order to get some useful conclusions and inspiration. Rest of the article is organized as follows: The second part of the country in draw Foreign Investment in a variety of macroEconomic theory, based on the domestic market reveals the impact of factors on the mechanism of Investment demand, and thus the main hypothesis proposed in this paper, the third part of the use of 1979 ~ 2009 Zhejiang Province, China and the relevant statistical data, factors affecting investment demand, empirical Research, and finally the main conclusions of this paper and policy recommendations.


Second, the theory of factors affecting investment demand analysis: Based on the perspective of the domestic market

1 domestic output (Y and investment demand, according to the acceleration principle, an increase in output from the root to stimulate investment. This principle could be interpreted as output increases machine utilization is high, idle resources are limited, thus increasing the investment possibilities on the other hand, increased output, national income increases, increase the profits of that investment, internal accumulation also increased, thus stimulating investment and therefore demand for domestic output is an important investment decision variables.

(2) domestic consumption demand (C and investment demand, first, some kind of social consumer goods increased demand will cause direct production of the kinds of consumer goods production sector, and a complementary relationship with the production of consumer goods sector to increase investment, and secondly, the increased demand for consumer goods , leading to production of consumer goods sector to expand investment, but also its means of production departments to form a new investment demand, so the investment will increase again for the individual, in the case of certain income, the increase in mean consumption savings, thus reducing the investment in fixed assets, inventories and residential investment, reduce investment demand at this time so that the consumer (the impact of final consumption effect on investment is uncertain.

3. The domestic price level (P and investment demand in the investment profit margin is expected under certain conditions, the hands of investors as long as there is enough idle funds, you do not take into account the risk of its investment, indicating that as long as the investment, can be obtained The corresponding proportion of the income and investment that can achieve the same amount equal profits, however, the investment must also consider the cost of investment, including tax, capital goods prices, interest rates and other capital in the tax rate relatively stable conditions, compared with investment income ratio, the impact of taxation on investment decisions is relatively light, capital goods prices will largely determine the investment decisions of capital goods prices rise means an increase in investment costs, has a negative impact on investment In addition, prices of consumer goods from perspective, the rise in the price level means an increase in investment income will stimulate investment demand, the impact of the price level effect on investment is uncertain.

4 interest rates (r and investment demand. The interest of investors to pay a compensation to the provider of currency is a major factor in the cost of investment decision. Higher the interest rate, the higher the cost of capital use, according to Keynesian theory, the investment was determined by the interest rate in the expected profitability of investment (marginal efficiency of capital) that when the enterprise is to invest, first decide on the level of interest rates, interest rates rise, investment demand will reduce interest rates decline, investment demand will increase, that investment is a decreasing function of interest rates, so in theory, interest rates negatively correlated with investment.


Third, China's investment in the empirical analysis of factors affecting demand :1979-2009

1 The basic model of the sample data set and select First, these basic assumptions and main theoretical hypothesis, we can give an investment function:
New investment and then come to the double log-linear regression model:
lnIt = e +? cut lnYt +? Zhuo lnCt +? discretion lnPt +? hereby lnrt + Ut (2)
It is one of total investment, e is the spontaneous investment, Yt is output, Ct to the final consumer, Pt is the price level, rt is the interest rate, Ut is the error term, of course, It's a total investment of factors in addition to Yt, Ct, Pt , rt these four important factors, there are other secondary factors, such as capital depreciation rate, population growth rate, employment rate, employment structure, we have included these factors in the error term Ut.

Then, the paper selected in 1979 and 2009 (after reform and opening up statistics of each variable as sample data. It is the total investment, including investment in fixed assets and inventory investment, Yt GDP expenditure approach that we use, Ct is the total spending, including government consumption and household consumption; Pt as the consumer price index, interest rate rt indicators for one-year deposit interest rate to measure due to changes in interest rates and sometimes several times a year, we made a weighted estimate, rt of the raw data from the Chinese people banking site and <<China Financial Yearbook>> other variable data are from <<China Statistical Yearbook>> the variable data for the actual value for 1978 of 100 base consumer price index excluding price changes impact.

(2) the national investment demand factors and the results of empirical test. To avoid spurious regression, using Eviews6.0 software first on the sample data unit root test (see Table 1. Upon examination, the variable data to meet the I (1 course, cointegration test to meet the prerequisite. Further, the use of Engle-Granger test method return on the investment model residuals after test of cointegration relations (see Table 1. cointegration test results show that consumer demand, price level, interest rates and production and investment needs of long-term stable equilibrium exists between the relationship further, we can get national estimates of factors affecting investment demand results (Table 2), AD-R2 was 0.998, indicating a good equation of goodness of fit. regression results show that the investment demand for the output of the most sensitive, and positive correlation between output increased by 1% 1.559 1% increase in investments, but consumer demand, price levels and interest rates on investment is not significant, resulting in the country The investment function:
First, the output is an important factor affecting investment demand, in line with the classic investment theory, followed by domestic investment demand, consumer demand is not the country an important factor influencing its reason may be in the following areas: (1 emerged after the reform and opening up the subject of investment diversification, the proportion of government budget for investment decreased significantly increased the proportion of independent investment, but limited to the traditional planning system inertia, demand for investment mainly depends on government investment to stimulate (2 parts of the country there is a huge difference in levels of Economic development the eastern provinces of the more developed economy, while the central and western regions of the lower income levels, but there is still a gap growing trend, which may to some extent, weakened the pull effect on investment spending from the long term , the income gap between the cumulative impact on investment is always negative (Lu Ming, etc., 2005 (3 itself can drive consumer demand and production of consumer goods production sector sector to increase investment demand, but in the control output variables, the increase in consumption means saving reduction, which may have a negative impact on investment demand. both positive and negative effects exist may lead to consumption had no significant impact. Again, the national investment demand response to changes in the price level is not significant. for the whole country, almost the main features of government investment means that most of the main sources of investment funds through the financial allocations to ensure growth in demand for making the investment by the budget and other major policy implications, to a lesser extent dominated by the price level and finally, as a Keynesian investment model the impact of the most important variable interest rates on investment demand is not there a significant effect, which may be due to China's interest rate system is not yet complete market-oriented reforms, the current price distortions remain, the reform of the financial system lagged behind in industrial and commercial reform, privatization of the bank's low, which leads to efficient allocation of capital markets can not make our monetary policy transmission mechanism of the poor rates, and thus can not form an effective role in the investment, making the government the means to regulate investment through the interest rate needs policy effect is not satisfactory. In this case, the expansionary fiscal policy will not produce significant crowding-out effect ①.

3 regional factors affecting investment demand and the results of empirical test: of Zhejiang Province. As mentioned earlier, China's Economic development level with large regional differences, regional income disparities evident, government investment on capital formation played a leading role, while the level of the market and the investment structure of the different investment needs may also lead to differences in factors, therefore, only from the national level, the conclusions of the study can not fully explain the formation of investment demand, which may be ignored some important factors. to eliminate these errors, select the level of Economic development and below higher degree of market and more balanced Zhejiang Province, to seek further investment in the domestic market demand for the important factors that impact should be noted that, with respect to Zhejiang, represented by high degree of openness of the country's eastern region, the financial crisis caused by external shocks to investment demand a greater impact, so its investment from domestic factors to explore factors affecting demand for the eastern region's Economic recovery and maintain sustained and rapid growth has more significance.

Zhejiang output, consumption and interest rate data selection criteria as above, but because the consumer price index, Zhejiang Province, was incomplete, it is replaced with a retail price index, and in 1978 the retail price index were obtained after translation of the actual value of each variable ; data are from the year <<Zhejiang Statistical Yearbook>> regression results shown in Table 3 (due to space constraints, it is omitted the unit root test and cointegration test results). Similarly, according to the regression results can be obtained Zhejiang province's investment function: Links to free download http://www.hi138.com Zhejiang Province, the production, consumption, price levels are a significant investment demand effect, and radiate a positive correlation between output increased by 1 percentage point, the investment would increase 0.419 percentage points, for every 1% increase in consumer demand, 0.607 9% increase in investments, price level for every 1% increase in investment has increased 0.570 5%, but interest rates affect the demand for investment as not significant.

As we all know, Zhejiang is the gathering commodity producers, most of which are commonly used in daily life in the consumer goods when people's incomes increase, the standard of living will be improved, the number of people to consumer goods, have become increasingly demanding high grade which requires increased production of consumer goods, new investment and thus boost investment in the development of Zhejiang. and the level of economic development in various regions of Zhejiang, more balanced, and the Zhejiang Provincial Government attaches great importance to the balanced development of regional coordination, the province has continued to narrow the regional gap trend, which has to a certain extent, explains why Zhejiang Investment and consumption was positively related causes, while located in the eastern coastal areas of Zhejiang, the tide of reform and opening up its market makes a higher degree of business represented by temperature enterprises in Zhejiang family's sense of doctrinal Innovation, coupled with more liberal policies on local government, private small private investment by policy constraints, leading to the private economy booming, demand-led investment in Zhejiang, which means a greater degree of investment demand, Zhejiang Province by the market mechanism on the impact of product structure, Zhejiang enterprises mainly produce apparel, footwear, toys and other labor-intensive final consumer goods, capital goods they need most from overseas purchase, so the price increases reflected more on increase in investment income, have limited impact on production costs, which will stimulate investment demand. In addition, consumer demand for investment also makes a positive role in boosting the level of investment must rise with the price increase ②.


Fourth, the conclusions and policy recommendations

Investment demand is an important component of domestic demand, consumption and investment to achieve the coordinated development of China's Economic development mode shift in important ways and direction. Based on the post-crisis era of expanding domestic demand, the reality of the background, the angle from the domestic market to build a macro-investment model , using 1979 to 2009 time series data on the impact of Chinese investment demand of the main factors of the empirical analysis. Nationwide, there is only output on the investment demand a significant positive impact, while the consumption price level and the impact of interest rates was not significant. and then to Zhejiang Province on the regional level empirical studies have found that output, consumption and investment demand, price levels are associated with significant positive correlation between the level of interest rates is not the same demand for investment have a significant impact on the National and Zhejiang differences in factors affecting investment demand is also to some extent reflects the income gap between the level of the market and the investment structure of investment demand and other factors may have an indirect impact on the formation of the potential.

Based on these findings, this article on the healthy development of China's investment requirements, thus effectively expanding domestic demand, made the following policy recommendations: (1 to implement the proactive fiscal policy loose and maintain high economic growth (2 improve the income distribution system and the social security system, reduce the income gap, efforts to expand consumer demand, consumption and investment to achieve the coordination of growth compared with the national to the eastern part of Zhejiang Province, represented by the growth in consumer demand may promote investment growth, which is precisely to promote the consumption and investment that the double growth for the expansion of domestic demand, economic development the importance of transformation (3 reasonable regulation of price levels, to maintain steady growth in investment demand in the role of macroeconomic policy easing, the price level may rise to some extent, although this to some extent, promote the growth of investment demand, but will also reduce people's real income, thus restricting the growth in consumer demand and therefore the government should be a reasonable regulation of price levels, to prevent excessive price rises, making consumption and investment to achieve effective, stable growth (4 actively promoting market-oriented interest rate reforms, give full play to the resource allocation function of capital markets, clear the monetary policy transmission mechanism.


Notes:
① crowding-out effect is to increase government spending or cutting taxes caused the rise in the structural deficit, interest rates may increase, reduce or out of the phenomenon of domestic private investment. The mechanism can be expressed as: G ↑ → Y ↑ → L1 ↑ → L2 ↓ → r ↑ → I ↓ → Y ↓. When the interest rate can not form an effective role in the investment, the crowding-out effect is not necessarily obvious.

② Lu Ming, et al (2005 study found, CPI has a role in promoting investment.

References:
1 SUN Feng. Precautionary saving theory and Chinese consumer behavior. Nankai Economic Research, 2001, (1:54-58.

2 Yang Tianyu. The distribution of income and effective demand. Beijing: Economic Science Press, 2001.

3. Liudong Huang, Chen Kunrong. Public spending and economic development mode shift: empirical analysis of China's Economic Science, 2010, (4:5-14.

4 Wang Jun, China's empirical analysis of the investment function. Modern Economic Science, 2001, (3:19-24.

5 Song Haiyan, Liu Zi Nan, Jiang Ping, the reform period, China's total investment in the analysis of the determinants of the World Economic Forum, 2003, (1:44-56.

6 Liu Peiling, Su Yong, Chinese private investment in factors of empirical Research. Fudan University (Natural Science), 2003 (5:742-748.

Fund: Ministry of Education, Philosophy and Social Science Innovation Base "economic restructuring and development of Nanjing University Center for" sub-project "Economic growth and structural transformation of Research" project.

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