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Saving China’s Stock Market?

Yi Huang (), Jianjun Miao () and Pengfei Wang ()
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Yi Huang: Graduate Institute, Geneva

IMF Economic Review, 2019, vol. 67, issue 2, No 4, 349-394

Abstract: Abstract We estimate the value creation for the stocks purchased by the Chinese government between the period starting with the market crash in mid-June of 2015 and the market recovery in September. We find that the government intervention increased the value of the rescued non-financial firms by RMB 206 billion after netting out the average purchase cost, which is about 1% of the Chinese GDP in 2014. The short-term value creation came from the increased stock demand, the reduced default probabilities, and the increased liquidity. The intervention may come at a long-run cost of creating moral hazard, preventing price discovery, creating more uncertainty, and damaging government credibility.

JEL-codes: G14 G15 G18 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1057/s41308-019-00079-z

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