Monetary Stimulus amid the Infrastructure Investment Spree: Evidence from China's Loan-Level Data

Kaiji Chen, Haoyu Gao (), Patrick Higgins, Daniel Waggoner and Tao Zha

No 2020-16, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: We study the impacts of the 2009 monetary stimulus and its interaction with infrastructure spending on credit allocation. We develop a two-stage estimation approach and apply it to China's loan-level data that covers all sectors in the economy. We find that except for the manufacturing sector, monetary stimulus itself did not favor state-owned enterprises (SOEs) over non-SOEs in credit access. Infrastructure investment driven by nonmonetary factors, however, enhanced the monetary transmission to bank credit allocated to local government financing vehicles in infrastructure and at the same time weakened the impacts of monetary stimulus on bank credit to non-SOEs in sectors other than infrastructure.

Keywords: infrastructure investment; monetary policy transmission; fiscal shocks; policy interaction; credit reallocation; LGFVs (search for similar items in EconPapers)
JEL-codes: C13 C3 E02 E5 (search for similar items in EconPapers)
Pages: 80
Date: 2020-08-27
New Economics Papers: this item is included in nep-cna, nep-mac and nep-tra
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Published in 2020

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Related works:
Journal Article: Monetary Stimulus amidst the Infrastructure Investment Spree: Evidence from China's Loan‐Level Data (2023)
Working Paper: Monetary Stimulus Amidst the Infrastructure Investment Spree: Evidence from China's Loan-Level Data (2020)
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DOI: 10.29338/wp2020-16

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