“To guide or not to guide? Quantitative monetary policy tools and macroeconomic dynamics in China”
Hongyi Chen, Michael Funke, Ivan Lozev and Andrew Tsang
BOFIT Discussion Papers 3/2017
This paper discusses the macroeconomic effects of China’s informal banking regulatory tool “win-dow guidance,” introduced in 1998. Using an open-economy DSGE model that includes the com-mercial banking sector, we study the stabilizing effects of this non-standard quantitative monetary policy tool and the implications of quantity-based vs. price-based monetary policy instruments for welfare. The analyses are relevant to the current overhaul of Chinese monetary policy.
“Financial frictions and foreign direct investment: Evidence from Japanese microdata”
Horst Raff, Michael Ryan and Frank Stähler
In: Journal of International Economics, Vol. 112, pp 109 – 122
Using Japanese microdata for the period 1980 to 2000 Raff et al. find evidence for two transmission channels from financial shocks to foreign direct investment: a collateral channel, whereby changes in the value of investors’ landholdings affect their borrowing ability; and a lending channel, whereby changes in bank health affect banks’ lending ability.
“Government Credit, a Double‐Edged Sword: Evidence from the China Development Bank”
In: The Journal of Finance, Vol. 73, No. 1, pp 275 – 316
Using proprietary data from the China Development Bank (CDB), this paper examines the effects of government credit on firm activities. Tracing the effects of government credit across different levels of the supply chain, Ru finds that CDB industrial loans to state‐owned enterprises (SOEs) crowd out private firms in the same industry, but crowd in private firms in downstream industries.
“The effects of ownership change on bank performance and risk exposure: Evidence from Indonesia”
Mohamed Shaban and Gregory A. James
In: Journal of Banking & Finance, Vol. 88, pp 483 – 497
Shaban and James investigate the effects of an ownership change on the performance and exposure to risk of 60 Indonesian commercial banks over the period 2005-2012. They can show, that state-owned banks tend to be less profitable and more exposed to risk than private and/or foreign banks.
“Monetary stimulation, bank relationship and innovation: Evidence from China”
Gaoping Zheng, Shuxun Wang and Yongxin Xu
In: Journal of Banking & Finance, Vol. 89, pp 237-248
Zheng et al. use China’s four trillion yuan stimulus package of 2008 as an exogenous shock, to investigate whether monetary stimulation can benefit the real economy.
“Credit and Fiscal Multipliers in China”
Sophia Chen, Lev Ratnovski and Pi-Han Tsai
IMF Working Paper WP/17/273
Chen et al. estimate credit and fiscal multipliers in China. They use the tenure of the provincial party secretary, interacted with the type of stimulus used in other provinces, to obtain separate instruments for provincial credit and government expenditure. The results suggest that reducing credit growth in China is unlikely to disrupt output growth, whereas fiscal policy may be effective in supporting macroeconomic adjustment.
“Risks in China’s Financial System”
Zheng Michael Song and Wei Xiong
NBER Working Paper No. 24230
Since 2008 the Chinese debt-to-GDP ratio skyrockets. This fact, and the high leverage as well as the soaring housing prices, have caused wide concerns about the risks and instability of China’s financial system. Motivated by these concerns Song and Xiong reviewed several commonly perceived financial risks in their article and discuss the roots in China’s unique economic and financial system.
“Value-added exports and U.S. local labor markets: Does China really matter?”
Leilei Shen and Peri Silva
In: European Economic Review, Vol. 101, January 2018, Pages 479-504
In this paper, the main focus is the direct contribution of the Chinese economy to changes in U.S. labor market outcomes. Their strategy follows the insights provided by a model of international trade with G regions, where N of these regions represent commuting zones in the U.S. economy, and where firms in a particular sector and country are assumed to have access to the same technology displaying increasing returns to scale.
“Unified China and Divided Europe”
Chiu Yu Ko, Mark Koyama and Tuan-Hwee Sng
In: International Economic Review, January 2018, Vol. 59, No. 1, forthcoming
Throughout much of history,the most economically developed region of the world wasn’t Europe but China, which was typically a unified empire. This paper proposes a unified framework based on Eurasian geography to (a) help explain the different political equilibria in China and Europe, and (b) explore the economic consequences of political centralization and fragmentation.
“Post-disaster aid and development of the manufacturing sector: Lessons from a natural experiment in China”
Erwin Bult, Lih Xu and Xiaobo Zhang
In: European Economic Review, Vol. 101, January 2018, Pages 441-458
Bult et al. adopt a disaggregate approach to study the link between aid and Dutch Disease dynamics, using a natural experiment in China. Specifically, they examine whether post- disaster aid provided to a subsample of Chinese counties, devastated by an earthquake in 2008, affects the sectoral composition of local economies. Using different methods, they consistently find that counties receiving (more) aid —even “nearby counties” not directly damaged by the earthquake —tend to suffer from a contraction of the manufacturing sector.
“Population policies, demographic structural changes, and the Chinese household saving puzzle”
Suqin Ge, Dennis Tao Yang, Junsen Zhang
In: European Economic Review, Vol. 101, January 2018, Pages 181 – 209
Household saving rates have increased dramatically over the past two decades in China, in addition to the rise in average saving rate; the age-saving profile has also evolved into an unusual pattern. In this paper, Ge et al. propose and test a new hypothesis that demographic structural changes caused by a series of population control policies since the 1970s have contributed to changes in China’s household saving patterns. Therefor they develop a simple overlapping generation (OLG) model to illustrate the effects of population control policies and demographic structural changes on saving decisions of individuals at different life stages.
“Credit ratings of domestic and global agencies: What drives the differences in China and how are they priced?”
Xianfeng Jiang and Frank Packer
BIS Working Papers No. 648
In contrast to the the domestic rating agencies the top global agencies, headquartered outside of China, rate bonds, that are issued overseas by Chinese corporations, usually with much lower grades. In this paper, Jiang and Packer examine the risk assessments of Chinese (non-financial) companies published by the major Chinese rating agencies and the two largest global rating agencies. Further, they investigate the degree to which rating scales are comparable between domestic rating agencies, as well as between domestic and global rating agencies.
“The Rise and Fall of Local Elections in China: Theory and Empirical Evidence on the Autocrat’s Trade-Off”
Monica Martinez-Bravo, Gerard Padró I Miquel, Nancy Qian and Yang Yao
NBER Working Paper No. 24032
In the late 80’s and early 90’s China has introduced elections at the local level. The functions of these locally elected bodies are typically managerial or administrative, with little political consequence. Hence, existing theories that explain the presence of elections at the elite level do not provide a good framework for understanding the presence of local elections. Thus, the main goal of the paper by Martinez-Bravo et al. is to address this gap in the literature and provide a theory and empirical evidence on the conditions under which an autocratic regime would allow local elections.
“Assessing China’s Residential Real Estate Market”
Ding Ding, Xiaoyu Huang, Tao Jin and W. Raphael Lam
IMF Working Paper WP/17/248
In this paper Ding et al. use city-level real estate data to estimate the range of overvaluation of real estate markets across city-tiers in China. Further, they assesse the main risks of a real estate slowdown and its impact on economic growth and financial stability. They assume, if house prices rise further beyond “fundamental” levels and the bubble expands to smaller cities, it would increase the likelihood and costs of a sharp correction. That could weaken growth, undermine financial stability, reduce local government spending room, and spur capital outflows
“Financial Development, Financial Structure and Income Inequality in China”
Guanchu Li, Yuanyuan Liu, Chengsi Zhang
In: The World Economy, Vol. 40, No. 9, 1890-1917
The rapid growth that China has experienced throughout the past few decades was accompanied by a remarkable increase in income inequality. Li et al. investigate the linear and non-linear impacts of financial development and structure on income inequality, by using panel data for 23 Chinese provinces over the period from 1996 to 2012. Further they pay attention to the dual structure (rural and urban regions) of the Chinese economy.