 China’s market economy, shadow banking and the frequency of growth slowdownVo Phuong Mai Le, Kent Matthews, David Meenagh, A. Patrick Minford and Zhiguo Xiao () Manchester School, 2021, vol. 89, issue 5, 420-444 Abstract: The activity of the Shadow Banks in China has been the subject of considerable interest in recent years. Total shadow banking lending has reached over 60% of GDP and has grown faster than regular bank lending. It has been argued that unregulated shadow banking has fuelled a credit boom that poses a risk to the stability of the financial system. This paper estimates a model of the Chinese economy using a DSGE framework that accommodates a banking sector that isolates the effects of lending to the private sector including shadow bank lending. A refinement of the model allows for bank lending including lending by the shadow banks to affect the credit premium on private investment. The main finding is that while financial shocks are significant, it is real shocks that dominate. The model is used to simulate the frequency of growth slowdowns in China and concludes that these are more likely to be driven by real sector shocks rather than financial sector, including shadow bank shocks. This paper differs from other applications in its use of indirect inference to test the fitted model against a three‐equation VAR of inflation, output gap and interest rate. Date: 2021 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:manchs:v:89:y:2021:i:5:p:420-444 Ordering information: This journal article can be ordered from Access Statistics for this article Manchester School is currently edited by Keith Blackburn More articles in Manchester School from University of Manchester Contact information at EDIRC. |
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