Evolution Dynamics of Regional Financial Stability in China and the Effect of “Double Pillar” Policy Regulation
Evolution Dynamics of Regional Financial Stability in China and the Effect of “Double Pillar” Policy Regulation
Author：Deng Chuang,Yang Chenlong,Xie Jingxuan Journal：Journal of Central University of Finance & Economi Date：2026(2)
Abstract:
The Fourth Plenary Session of the 20th Central Committee of the CPC emphasized "We should promote more coordinated regional development, boost interconnected development between regions". Regional financial stability, as an important foundation for financial support of coordinated regional development, is closely related to people's well-being and macro stability. This paper employs the mixed-frequency dynamic factor model to conduct a measurement of the financial stability across 31 provinces. Based on this, the Dagum Gini coefficient and its decomposition method are utilized to depict regional heterogeneity characteristics, while the panel Markov regime switching model and Moran index capture the spatio-temporal evolution dynamics. Subsequently, a PVAR model is constructed to empirically test the regulatory effect of the "double pillar" policy framework on regional financial stability.The findings indicate that regional financial stability in China exhibits significant spatial differentiation and cross-regime stickiness, with inter-regional heterogeneous differentiation and cross-overlapping effects being the primary sources of differences. Furthermore, the combination of price-based monetary policy and macroprudential policy can effectively maintain regional financial stability, with a relatively more pronounced regulatory effect observed in the eastern region. The findings provide useful policy insights for effectively safeguarding regional financial stability and promoting cross-border financial governance.
