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Money market funds, bank loans and interest rate liberalization: Evidence from an emerging market

Author

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  • Li, Haoyu
  • Tao, Qizhi
  • Xiao, Hongying
  • Li, Guowei

Abstract

We report significant effects of the development of money market funds (MMFs) on bank deposits, loans and interest rate liberalization using bank data in China from 2008 to 2014. In particular, the development of MMFs has shifted away bank deposits and reduced banks’ ability to make loans. Furthermore, the yields of bank-guaranteed financial products and MMFs show a significant and positive relation, implying that the development of MMFs has promoted interest rate liberalization in China. These results remain to hold after we control for the potential simultaneity bias.

Suggested Citation

  • Li, Haoyu & Tao, Qizhi & Xiao, Hongying & Li, Guowei, 2019. "Money market funds, bank loans and interest rate liberalization: Evidence from an emerging market," Finance Research Letters, Elsevier, vol. 30(C), pages 426-435.
    • Handle: RePEc:eee:finlet:v:30:y:2019:i:c:p:426-435
    DOI: 10.1016/j.frl.2019.04.020
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    References listed on IDEAS

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    Cited by:

    1. Tadiwanashe Muganyi & Linnan Yan & Yingkai Yin & Huaping Sun & Xiangbin Gong & Farhad Taghizadeh-Hesary, 2022. "Fintech, regtech, and financial development: evidence from China," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-20, December.
    2. Zhang, Ailian & Wang, Shuyao & Lien, Donald & Yu, Chia-Feng (Jeffrey), 2023. "Are banks rewarded for financial consumer protection? Evidence from a quasi-natural experiment," Finance Research Letters, Elsevier, vol. 52(C).

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    More about this item

    Keywords

    Money market funds; Bank loans; Interest rate liberalization; Chinese market;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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