Credit expansion is the main reason of the economic cycle. Under the background of “Off- Keynesianism”, the business cycle theory of the Austrian School of Economics provides theoretical support for the current Structural Reforms. The theoretical part points out that the high capital-intensive industries squeeze out investment in the low capital-intensive industries, leading to imbalanced industrial structure. The empirical study divides the industries into two categories of being high and low according to the capital intensive degree, applying PVAR model to test the influence of bank loan on the investment, debts, research and development expenditure, and profits of the two kinds of industries. The empirical analysis of this thesis provides a new empirical evidence for the application of business cycle theory in Chinese context.
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