Corporate investment and shadow banking channel of monetary policy

Bo Jiang and Liang Fu

Emerging Markets Review, 2025, vol. 67, issue C

Abstract: This paper examines the differential impact of monetary policy on investment between state-owned enterprises (SOEs) and non-SOEs in China, a context marked by a transition from quantity-based to interest rate-based monetary policy and the growth of the shadow banking sector. Utilizing a high-frequency, interest-rate-based measure of monetary policy shocks, we find that contractionary monetary policy has a significantly larger negative impact on SOE investment. This differential response is attributed to the distinct financing structures of SOEs and non-SOEs: SOEs' reliance on traditional bank loans, facilitated by implicit government guarantees, renders them more sensitive to monetary tightening, while non-SOEs' dependence on the shadow banking sector mitigates this effect.

Keywords: Monetary policy transmission; Investment dynamics; Shadow banking; Credit spread (search for similar items in EconPapers)
JEL-codes: E44 E52 G23 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:67:y:2025:i:c:s1566014125000408

DOI: 10.1016/j.ememar.2025.101291

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