Research on Modeling Analysis and Risk Early Warning of Regional Financial Stability Based on VAR Model--Taking Henan Province of China as an Example

Abstract

This paper synthesizes the influencing factors of financial stability in Henan Province, selects indicators from both internal and external aspects, and determines the index system of economic stability in Henan Province. On this basis, the entropy method is utilized to attach weights to each indicator, and the impulse response and Granger causality test in the VAR model is used to detect the financial stability of Henan Province. In addition, considering that financial risk early warning is critical to the economic security of the country and Henan Province, the principal component analysis method is further used to screen the risk warning indicators, construct a VAR model for financial risk early warning in Henan Province, and analyze the financial risk based on the comprehensive risk warning score. The results show that the risk status of banking financial institutions (16.3252) is relatively poor, while the complete risk status of financial guarantee institutions (42.62864) is at the warning level, and the VAR model accurately reveals the financial stability and risk status of Henan Province. This study provides theoretical knowledge for the modeling analysis of financial stability and risk early warning research in Henan Province, which is of great practical significance for improving the effect of local financial supervision in Henan Province and maintaining the stable operation of finance in Henan Province.

Keywords

• var model
• risk early warning
• principal component analysis method
• entropy value method
• financial stability
• 68q05