Monetary Policy and Bank Lending in China — Evidence from Loan-Level Data

HKIMR Working Paper No.16/2013

44 Pages Posted: 28 Oct 2013

See all articles by Dong He

Dong He

Hong Kong Monetary Authority; Hong Kong Institute for Monetary Research (HKIMR)

Honglin Wang

Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR)

Date Written: October 28, 2013

Abstract

We investigate how monetary policy in a mixed financial system such as that of China, which is characterized by a juxtaposition of quantity- and price-based policy instruments and the co-existence of regulated and market-determined interest rates, affects bank lending. Using a newly constructed loan-level dataset, we find that loan rates but not loan size are affected by both the regulated and the market-determined interest rates and that loan size is instead affected by an implicit quota that is imposed on aggregate bank lending through window guidance. We interpret this finding to be evidence of credit rationing.

Keywords: Monetary Policy, Bank Lending, The People’s Bank of China (PBC)

JEL Classification: E52, E58, G21, G34

Suggested Citation

He, Dong and Wang, Honglin, Monetary Policy and Bank Lending in China — Evidence from Loan-Level Data (October 28, 2013). HKIMR Working Paper No.16/2013. Available at SSRN: https://ssrn.com/abstract=2346181 or http://dx.doi.org/10.2139/ssrn.2346181

Dong He

Hong Kong Monetary Authority

3 Garden Road, 30th Floor
Hong Kong
Hong Kong

Hong Kong Institute for Monetary Research (HKIMR)

3 Garden Road, 8th Floor
Hong Kong
China

Honglin Wang (Contact Author)

Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR) ( email )

3 Garden Road, 8th Floor
Hong Kong
China

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