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on China |
| By: | Huang, Yi; Pagano, Marco; Panizza, Ugo |
| Abstract: | In China, between 2006 and 2013, local public debt crowded out the investment of private firms by tightening their funding constraints, while leaving state-owned firms' investment unaffected. We establish this result using a purpose-built dataset for Chinese local public debt. Private firms invest less in cities with more public debt, the reduction in investment being larger for firms located farther from banks in other cities or more dependent on external funding. Moreover, in cities where public debt is high, private firms' investment is more sensitive to internal cash flow, also when cash-flow sensitivity is estimated jointly with the probability of being credit-constrained. |
| Keywords: | investment,local public debt,crowding out,credit constraints,China |
| JEL: | E22 H63 H74 L60 O16 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:632&r=all |
| By: | Guofeng Sun |
| Abstract: | Banks' shadow, or money creation by banks beyond traditional loans, plays an important role in China's money-creation process, posing a number of challenges to monetary policy operations and financial risk management. This paper analyzes the money-creation mechanisms of China's shadow banking sector in detail, provides accurate measurements, investigates its effects on financial risk, and surveys recent regulation. To strengthen supervision, China's regulators should closely track the evolution of various shadow banking channels, both on- and off-balance sheet. Specific macroprudential regulation tools, such as asset reserves and risk reserves, should be applied separately to banks' shadow and traditional shadow banking. |
| Keywords: | banks' shadow, traditional shadow banking, credit money creation, bank accounting, regulation |
| JEL: | E44 E51 G28 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:822&r=all |