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How Much Has Private Credit Lending Reacted to Monetary Policy in China? The Case of Wenzhou

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Author Info

  • Duo Qin

    ()
    (Department of Economics, SOAS, University of London, UK)

  • Zhong Xu

    (People's Bank of China)

  • Xue-Chun Zhang

    (People's Bank of China)

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Abstract

This study investigates empirically what the major factors are which have driven Wenzhou’s informal credit market and how much that market is responsive to monetary policies and the formal banking conditions nationwide. The main findings are: (i) the informal credit lending rates are highly receptive to monetary policies; (ii) the market is dominantly demand driven; (iii) the informal lending is substitutive to bank savings in the short run but complementary to banking lending in the long run; and (iv) the market is complementary to excessive investments in the local real estate market.

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Bibliographic Info

Paper provided by Department of Economics, SOAS, University of London, UK in its series Working Papers with number 178.

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Length: 23
Date of creation: Feb 2013
Date of revision:
Handle: RePEc:soa:wpaper:178

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Keywords: informal credit market; monetary policy;

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  1. Franklin Allen & Jun Qian & Meijun Qian, 2002. "Law, Finance, and Economic Growth in China," Center for Financial Institutions Working Papers 02-44, Wharton School Center for Financial Institutions, University of Pennsylvania.
  2. Ngalawa, Harold & Viegi, Nicola, 2013. "Interaction of formal and informal financial markets in quasi-emerging market economies," Economic Modelling, Elsevier, vol. 31(C), pages 614-624.
  3. Hendry, David F., 1995. "Dynamic Econometrics," OUP Catalogue, Oxford University Press, number 9780198283164.
  4. Gupta, Manash Ranjan & Chaudhuri, Sarbajit, 1997. "Formal Credit, Corruption and the Informal Credit Market in Agriculture: A Theoretical Analysis," Economica, London School of Economics and Political Science, vol. 64(254), pages 331-43, May.
  5. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
  6. Atieno, Rosemary, 2009. "Linkages, Access to Finance and the Performance of Small-Scale Enterprises in Kenya," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  7. Andreas Madestam, 2009. "Informal Finance: A Theory of Moneylenders," Working Papers 2009.69, Fondazione Eni Enrico Mattei.
  8. Carpenter, Seth B, 1999. "Informal Credit Markets and the Transmission of Monetary Policy: Evidence from South Korea," Review of Development Economics, Wiley Blackwell, vol. 3(3), pages 323-35, October.
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