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What provides the micro-foundation of monetary policies in the absence of mature economic institutions?

Tong Fu

International Review of Financial Analysis, 2021, vol. 73, issue C

Abstract: In the absence of mature economic institutions, what provides the micro-foundation of monetary policies? Taking corporate financing of China's firms as a representative example, first, our data suggest that financial access of firms becomes indeed squeezed as the monetary policies require. Then we confirm that government intervention leads firms' financial access to become difficult since the financial contraction policies. We also provide evidence that government intervention indeed promotes severity of access to finance. These evidences confirm that government intervention squeezes financial access after central government's financial contraction policies and that government intervention functions to support the implementation of monetary policies. Therefore, this paper shows that government intervention provides micro-foundation of the monetary policies in the absence of mature economic institutions.

Keywords: Government intervention; Monetary policies; Financial access; China (search for similar items in EconPapers)
JEL-codes: C51 G21 G28 O17 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:73:y:2021:i:c:s1057521920302581

DOI: 10.1016/j.irfa.2020.101615

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