Monetary stimulus policy in China: The bank credit channel

Min Zhang and Yahong Zhang

China Economic Review, 2022, vol. 74, issue C

Abstract: This paper develops a novel while plausible way to model the Chinese monetary transmission via open market operations (OMOs). In the model, monetary injections through OMOs, together with differentiated collateral regulation in the banking sector, directly affect banks' loan capacities, which then influence sectoral investments and aggregate GDP. The quantitative analysis shows that the 2009–2010 monetary expansion explains nearly 66% of the rise in GDP growth. Moreover, balancing credit allocation across sectors and applying unified banking regulations jointly enhance the GDP growth rate by 1.65 percentage points, with the contribution of the unified banking regulations proving more important.

Keywords: Monetary stimulus; Bank credit channel; Open market operation rule; Chinese economy (search for similar items in EconPapers)
JEL-codes: E32 E44 E52 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:74:y:2022:i:c:s1043951x22000839

DOI: 10.1016/j.chieco.2022.101825

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