The resource reallocation effect of monetary policy

Abstract

This paper studies the heterogeneous responses of firms to monetary policy shocks and the possible adverse effect of expansionary monetary policy on resource reallocation. Using Chinese firm‐level data, we find that when expansionary monetary shock hits the economy, less productive firms are more responsive than productive firms in terms of resource accumulation. We identify two mechanisms for this effect. First, less productive firms accumulate net worth more slowly. They have higher leverage ratio and are more sensitive to monetary policy changes (the intensive margin). Second, monetary expansion relaxes borrowing constraints, which enables unproductive firms to survive. The congestion effect prevents resources from allocating to more productive firms. Our finding is robust even if we use private firm subsamples or avoid the massive fiscal stimulus in China around 2009. We provide a simple model of firm dynamics to capture these effects.

Green coordinated development from the transformation perspective: Systemic coupling and dynamic correlation

“…[12][13][14][15] Moreover, green finance has significant ecological governance effects that are reflected at the micro level, such as optimizing resource allocation, promoting industrial structure upgrading, and enhancing technological innovation capacity. [16][17][18] (3) In research on the relationship between digital finance and ecological governance, digital finance will, to some extent, enhance regional green technological innovation capacity and further provide strong support for energy and environmental performance. 2 The advantages of digital finance as a macro-regulatory tool for environmental pollution management are highlighted by portable new financial marketbased operational models such as mobile payment and online offices, which minimize the transaction costs in the ecological governance process and correspondingly reduce the rate of consumption of limited resources.…”