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Corporate investment and shadow banking channel of monetary policy

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  • Jiang, Bo
  • Fu, Liang

Abstract

This paper examines the differential impact of monetary policy on investment between state-owned enterprises (SOEs) and non-SOEs in China, a context marked by a transition from quantity-based to interest rate-based monetary policy and the growth of the shadow banking sector. Utilizing a high-frequency, interest-rate-based measure of monetary policy shocks, we find that contractionary monetary policy has a significantly larger negative impact on SOE investment. This differential response is attributed to the distinct financing structures of SOEs and non-SOEs: SOEs' reliance on traditional bank loans, facilitated by implicit government guarantees, renders them more sensitive to monetary tightening, while non-SOEs' dependence on the shadow banking sector mitigates this effect.

Suggested Citation

  • Jiang, Bo & Fu, Liang, 2025. "Corporate investment and shadow banking channel of monetary policy," Emerging Markets Review, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:ememar:v:67:y:2025:i:c:s1566014125000408
    DOI: 10.1016/j.ememar.2025.101291
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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