Monetary Stimulus Amidst the Infrastructure Investment Spree: Evidence from China's Loan-Level Data

80 Pages Posted: 18 Sep 2020

See all articles by Kaiji Chen

Kaiji Chen

Emory University - Department of Economics; Federal Reserve Bank of Atlanta

Multiple version iconThere are 2 versions of this paper

Date Written: July 26, 2020

Abstract

We study the impacts of the 2009 monetary stimulus and its interaction with infrastructure spending on credit allocation. We develop a two-stage estimation approach and apply it to China's loan-level data that covers all sectors in the economy. We find that except for the manufacturing sector, monetary stimulus itself did not favor SOEs over non-SOEs in credit access. Infrastructure investment driven by non-monetary factors, however, enhanced the monetary transmission to bank credit allocated to LGFVs in infrastructure and at the same time weakened the impacts of monetary stimulus on bank credit to non-SOEs in sectors other than infrastructure.

Keywords: Infrastructure investment, monetary policy transmission, fiscal shocks, policy interaction, credit reallocation, LGFVs

JEL Classification: E52, E62, G11, G18

Suggested Citation

Chen, Kaiji, Monetary Stimulus Amidst the Infrastructure Investment Spree: Evidence from China's Loan-Level Data (July 26, 2020). Available at SSRN: https://ssrn.com/abstract=3667758 or http://dx.doi.org/10.2139/ssrn.3667758

Kaiji Chen (Contact Author)

Emory University - Department of Economics ( email )

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HOME PAGE: http://https://sites.google.com/site/chenkaiji/research

Federal Reserve Bank of Atlanta ( email )

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