American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Nexus of Monetary Policy and Shadow Banking in China
American Economic Review
vol. 108,
no. 12, December 2018
(pp. 3891–3936)
(Complimentary)
Abstract
We study how monetary policy in China influences banks' shadow banking activities. We develop and estimate the endogenously switching monetary policy rule that is based on institutional facts and at the same time tractable in the spirit of Taylor (1993). This development, along with two newly constructed micro banking datasets, enables us to establish the following empirical evidence. Contractionary monetary policy during 2009–2015 caused shadow banking loans to rise rapidly, offsetting the expected decline of traditional bank loans and hampering the effectiveness of monetary policy on total bank credit. We advance a theoretical explanation of our empirical findings.Citation
Chen, Kaiji, Jue Ren, and Tao Zha. 2018. "The Nexus of Monetary Policy and Shadow Banking in China." American Economic Review, 108 (12): 3891–3936. DOI: 10.1257/aer.20170133Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- E52 Monetary Policy
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O23 Fiscal and Monetary Policy in Development
- P24 Socialist Systems and Transitional Economies: National Income, Product, and Expenditure; Money; Inflation
- P34 Socialist Institutions and Their Transitions: Financial Economics