Chinese shadow banking, financial regulation and effectiveness of monetary policy

Yang, Liu; Wijnbergen, Sweder van; Qi, Xiaojuan; Yi, Yuhuan

doi:10.1016/j.pacfin.2019.06.016

Cited by 43 publications

(27 citation statements)

References 18 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…( C ). 25 Bank loans are safe (default free) but subject to the regulatory constraint on the LDR, and are purchased at a discount price 0 < q < 1 . By contrast, risky nonloan assets are not subject to the LDR constraint, but to a default risk.…”

Section: A a Theoretical Modelmentioning

confidence: 99%

The Nexus of Monetary Policy and Shadow Banking in China

Chen

Ren

Zha

2018

American Economic Review

346

160

View full text Add to dashboard Cite

We study how monetary policy in China influences banks’ shadow banking activities. We develop and estimate the endogenously switching monetary policy rule that is based on institutional facts and at the same time tractable in the spirit of Taylor (1993). This development, along with two newly constructed micro banking datasets, enables us to establish the following empirical evidence. Contractionary monetary policy during 2009–2015 caused shadow banking loans to rise rapidly, offsetting the expected decline of traditional bank loans and hampering the effectiveness of monetary policy on total bank credit. We advance a theoretical explanation of our empirical findings. (JEL E32, E52, G21, O16, O23, P24, P34)

show abstract

Section: A a Theoretical Modelmentioning

confidence: 99%

The Nexus of Monetary Policy and Shadow Banking in China

Chen

Ren

Zha

2018

American Economic Review

346

160

View full text Add to dashboard Cite

show abstract

“…For completeness we mention alternative interventionist central banking models visible in Asia, where 'Structural Monetary Policy' is used to proactively support certain sectors via shadow banks with a specific focus on stimulating demand through mainly real estate, (centrally identified) key sectors, and infrastructure development (Chen et al 2018;Economist 2021a;Yang et al 2019). The model has been very effective at maintaining and raising growth rates (even after 2008), but it can and does lead to overbuilding in some sectors that is then followed by consolidation.…”

Section: Healing the Real Economymentioning

confidence: 99%

Crisis and the Role of Money in the Real and Financial Economies—An Innovative Approach to Monetary Stimulus

Simmons

Dini

Culkin

et al. 2021

JRFM

View full text Add to dashboard Cite

`Financial crisis’ is sometimes regarded as synonymous with `economic crisis’, but this is an oversimplification and risks missing the feedback loops between the financial and real economies. In this paper, the role of money is revisited in the context of distinguishing the real economy from the financial economy. A theoretical framework is developed to explain how endogenous (bank credit) and central bank exogenous (quantitative easing, QE) money creation feed into the real and financial economies. It looks at how the velocity of monetary circulation varies between the two economies and across asset types within the financial economy. Monetary transmission mechanisms are set into a framework that helps explain how QE stimulus risks combining asset price bubbles with poor growth in the real economy. The real economy transmission mechanism of `helicopter money’ is given context, enabling an assessment of the efficacy of both the QE and helicopter money policy routes. Finally, we present a new type of monetary transmission, `Smart Helicopter Money’, to deliver monetary stimulus to innovators, SMEs and high-growth firms via both complementary currencies and a modified form of QE in order to achieve proportionally greater impact on the real economy.

show abstract

“…Regulation organization. The regulation organization is an extensive concept, including the country's central bank, government financial department, monetary authority [40]. In the consortium blockchain system, these regulators are all full nodes, which save all the information of the whole blocks in the chain.…”

Section: Plos Onementioning

confidence: 99%

An intelligent cross-border transaction system based on consortium blockchain: A case study in Shenzhen, China

Dong

et al. 2021

PLoS ONE

View full text Add to dashboard Cite

Cross-border transactions have been more and more popular around the world. However, the current cross-border transactions still have risks and challenges, e.g., differences in regulation policies and unbalanced profits of banks. To address this critical issue, we construct a new framework for the transaction system with the support of blockchain technology. In this paper, we propose a new consortium blockchain system, namely asymmetric consortium blockchain (ACB), to ensure the implementation of cross-border transactions. Different from traditional consortium blockchain, the new blockchain system could support the supernode to regulate all the transactions timely. Furthermore, the new smart contract is designed to lower the opportunity loss for each node and make the profits allocation system fairer. In the end, the numerical experiments were carried out based on the transactions of Shenzhen and Hong Kong. The results show that the proposed ACB system is efficient to make the profit allocation fairer for the participants and keep intelligent for the new cross-border transaction system.

show abstract

Chinese shadow banking, financial regulation and effectiveness of monetary policy

Cited by 43 publications

References 18 publications

The Nexus of Monetary Policy and Shadow Banking in China

The Nexus of Monetary Policy and Shadow Banking in China

Crisis and the Role of Money in the Real and Financial Economies—An Innovative Approach to Monetary Stimulus

An intelligent cross-border transaction system based on consortium blockchain: A case study in Shenzhen, China

Contact Info

Product

Resources

About