The SOE Channel of Monetary Policy Transmission: Evidence from China's Economic Stimulus Package

Wenbin Chen (), Shi-Zhuan Han (), Jie Li () and Tianhang Zhou ()
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Wenbin Chen: East China Jiaotong University
Shi-Zhuan Han: East China Jiaotong University
Tianhang Zhou: Central University of Finance and Economics

Asian Economic Papers, 2021, vol. 20, issue 3, 73-93

Abstract: We examine the state-owned enterprises (SOEs) channel in monetary policy transmission in the context of China's 2008 stimulus package. Using a difference-in-difference approach, we show that the higher SOE share in the cities after the stimulus package, the more bank loans issued in the cities. Furthermore, we find that the role of SOEs in monetary policy transmission is more significant in underdeveloped cities and cities with a high level of government intervention. We adopt propensity score matching difference-in-difference to deal with potential endogeneity problem. The baseline results also survive a series of robustness tests.

Date: 2021
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