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Monetary Policy and Bank Lending in China - Evidence from Loan-Level Data

Author

Listed:
  • Dong He

    (Hong Kong Monetary Authority and Hong Kong Institute for Monetary Research)

  • Honglin Wang

    (Hong Kong Institute for Monetary Research)

Abstract

We investigate how monetary policy in a mixed financial system such as that of China, which is characterized by a juxtaposition of quantity- and price-based policy instruments and the co-existence of regulated and market-determined interest rates, affects bank lending. Using a newly constructed loan-level dataset, we find that loan rates but not loan size are affected by both the regulated and the market-determined interest rates and that loan size is instead affected by an implicit quota that is imposed on aggregate bank lending through window guidance. We interpret this finding to be evidence of credit rationing.

Suggested Citation

  • Dong He & Honglin Wang, 2013. "Monetary Policy and Bank Lending in China - Evidence from Loan-Level Data," Working Papers 162013, Hong Kong Institute for Monetary Research.
    • Handle: RePEc:hkm:wpaper:162013
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    Cited by:

    1. Shu, Chang & He, Dong & Cheng, Xiaoqiang, 2015. "One currency, two markets: the renminbi's growing influence in Asia-Pacific," China Economic Review, Elsevier, vol. 33(C), pages 163-178.
    2. Güneş Kamber & Madhusudan Mohanty, 2018. "Do interest rates play a major role in monetary policy transmission in China?," BIS Working Papers 714, Bank for International Settlements.
    3. Pao‐Lin Tien & Tara M. Sinclair & Edward N. Gamber, 2021. "Do Fed Forecast Errors Matter?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(3), pages 686-712, June.
    4. Tianye Lin & Yangyang Ji & Sen Zhang, 2020. "Real Estate, Interest Rates, and Crowding-out Effects," CEMA Working Papers 613, China Economics and Management Academy, Central University of Finance and Economics.
    5. Dong He & Honglin Wang & Xiangrong Yu, 2015. "Interest Rate Determination in China: Past, Present, and Future," International Journal of Central Banking, International Journal of Central Banking, vol. 11(4), pages 255-277, December.
    6. Ester Faia & Vincenzo Pezone, 2019. "Monetary Policy and the Cost of Wage Rigidity: Evidence from the Stock Market," 2019 Meeting Papers 278, Society for Economic Dynamics.
    7. Paul Hubert & Fabien Labondance, 2019. "Central bank tone and the dispersion of views within monetary policy committees," Sciences Po publications 2019 – 08, Sciences Po.
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    9. repec:hal:spmain:info:hdl:2441/7v8fvu0bf08jcoi4epn8cutjm8 is not listed on IDEAS
    10. Ricardo J. Caballero & Alp Simsek, 2022. "Monetary Policy with Opinionated Markets," American Economic Review, American Economic Association, vol. 112(7), pages 2353-2392, July.
    11. Taylor, Alan M. & Cloyne, James & Hürtgen, Patrick, 2022. "Global Monetary and Financial Spillovers: Evidence from a New Measure of Bundesbank Policy Shocks," CEPR Discussion Papers 17587, C.E.P.R. Discussion Papers.
    12. Bradley Jones & Joel Bowman, 2019. "China's Evolving Monetary Policy Framework in International Context," RBA Research Discussion Papers rdp2019-11, Reserve Bank of Australia.
    13. Faia, Ester & Pezone, Vincenzo, 2018. "The Cost of Wage Rigidity," CEPR Discussion Papers 13407, C.E.P.R. Discussion Papers.
    14. Makram El-Shagi & Lunan Jiang, 2023. "How the PBoC´s new MLF affects the yield curve," CFDS Discussion Paper Series 2023/1, Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China.
    15. Cheng, Xiaoqiang & Wang, Yabin, 2022. "Shadow banking and the bank lending channel of monetary policy in China," Journal of International Money and Finance, Elsevier, vol. 128(C).
    16. Dong He, 2014. "Comments on Eric Girardin, Sandrine Lunven and Guonan Ma's paper," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation, inflation and monetary policy in Asia and the Pacific, volume 77, pages 171-174, Bank for International Settlements.
    17. Chen, Donghua & Jiang, Dequan & Yu, Xin, 2015. "Corporate philanthropy and bank loans in China," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 402-424.
    18. Wei Yin & Kent Matthews, 2017. "Single Versus Multiple Banking Relationships-Evidence From Chinese Lending Market," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 62(01), pages 227-250, March.

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    More about this item

    Keywords

    Monetary Policy; Bank Lending; The People's Bank of China (PBC);
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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