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How does news-driven monetary policy frictions affect nonperforming loans?--Taking Chinese commercial banks as an example

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  • Zhang, Heng-Guo
  • Wang, Shihong
  • Xie, Yuchi

Abstract

In this paper, the monetary policy frictions index is constructed based on financial news and the dynamic stochastic general equilibrium (DSGE) model is extended with machine learning. We theoretically analyze how news-driven monetary policy frictions affect the nonperforming loans of commercial banks. Furthermore, a monetary policy frictions volatility network is constructed with complex network to study the spillover effect of monetary policy frictions in the network. Finally, spatial econometric methods are employed to empirically examine the effect of news-driven monetary policy frictions on nonperforming loans. The results show that monetary policy frictions have a significant positive spatial effect on the nonperforming loans of Chinese commercial banks. Thus, the government is expected to increase information transparency in the transmission of monetary policy to reduce information asymmetry.

Suggested Citation

  • Zhang, Heng-Guo & Wang, Shihong & Xie, Yuchi, 2025. "How does news-driven monetary policy frictions affect nonperforming loans?--Taking Chinese commercial banks as an example," The North American Journal of Economics and Finance, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:ecofin:v:76:y:2025:i:c:s106294082400278x
    DOI: 10.1016/j.najef.2024.102353
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    More about this item

    Keywords

    Dynamic stochastic general equilibrium model; Machine learning; Complex network; Spatial econometric methods; News-driven monetary policy frictions; Nonperforming loans;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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