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The SOE Channel of Monetary Policy Transmission: Evidence from China's Economic Stimulus Package

Author

Listed:
  • Wenbin Chen

    (East China Jiaotong University)

  • Shi-Zhuan Han

    (East China Jiaotong University)

  • Jie Li

    (Central University of Finance and Economics)

  • Tianhang Zhou

    (Central University of Finance and Economics)

Abstract

We examine the state-owned enterprises (SOEs) channel in monetary policy transmission in the context of China's 2008 stimulus package. Using a difference-in-difference approach, we show that the higher SOE share in the cities after the stimulus package, the more bank loans issued in the cities. Furthermore, we find that the role of SOEs in monetary policy transmission is more significant in underdeveloped cities and cities with a high level of government intervention. We adopt propensity score matching difference-in-difference to deal with potential endogeneity problem. The baseline results also survive a series of robustness tests.

Suggested Citation

  • Wenbin Chen & Shi-Zhuan Han & Jie Li & Tianhang Zhou, 2021. "The SOE Channel of Monetary Policy Transmission: Evidence from China's Economic Stimulus Package," Asian Economic Papers, MIT Press, vol. 20(3), pages 73-93, Fall.
    • Handle: RePEc:tpr:asiaec:v:20:y:2021:i:3:p:73-93
    DOI: 10.1162/asep_a_00836
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    Cited by:

    1. Eunkyung Lee, 2023. "The Transmission of Monetary Policy to Corporate Investment: The Role of Loan Renegotiation," Economics Discussion Paper Series 2310, Economics, The University of Manchester.
    2. Aubhik Khan & Soyoung Lee, 2023. "Persistent Debt and Business Cycles in an Economy with Production Heterogeneity," Staff Working Papers 23-17, Bank of Canada.
    3. Jiani Li & Jie Li & Tianhang Zhou, 2023. "State ownership and zombie firms: Evidence from China's 2008 stimulus plan," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(4), pages 853-876, October.
    4. Thiago Revil T. Ferreira & Daniel Ostry & John Rogers, 2023. "Firm Financial Conditions and the Transmission of Monetary Policy," Finance and Economics Discussion Series 2023-037, Board of Governors of the Federal Reserve System (U.S.).
    5. Cameron Fen, 2022. "Fast Simulation-Based Bayesian Estimation of Heterogeneous and Representative Agent Models using Normalizing Flow Neural Networks," Papers 2203.06537, arXiv.org.

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