The impact of China’s fiscal and monetary policy responses to the great recession: An analysis of firm-level Chinese data

Abstract

This paper investigates the effects of Chinese financial and fiscal policies designed to counter the worldwide Great Recession of 2008. We examine how policies designed to increase bank credit and health (i.e., asset liquidity, capital adequacy ratio, profitability, and bad loan ratio) influenced firm-level output, employment and investment. We also explore the impact of China's expansionary fiscal policy with regard to these firm-level variables. We find that the policy effects varied based on firm-level characteristics such as size, liability ratio, profitability, ownership and the industry in which the firm operates. With respect to the dynamic effects, our results suggest that Chinese financial and fiscal policies were generally effective in the short run, but their positive impacts ceased within two years.

Monetary policy as market stabilizer in the COVID-19 pandemic

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Did China’s “National Sustainable Development Plan of Resource-Based Cities” Promote Economic Growth?

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Combination of economic policies: how the perfect storm wrecked the Brazilian economic growth

“…Given that economic policies misapplication can damage economic growth, recently some researchers have analyzed several issues: the relevance of an increase in bank’s credit to stimulate growth; the influence of popular support in adopting economic policies that prove to be wrong in the long-term; and the effect of bad governance over long-term growth; are some examples. Based on an analysis of the Chinese case regarding the increase in bank credit to fight the Great Recession of 2008–2009, Xue et al ( 2020 ) find the limited positive impact of this strategy. Bó et al ( 2018 ), supported by a model that considers the populist relationship between voters and policymakers, show that voters can support policies that will be bad in the long run but are seemingly advantageous to them in the short term.…”