Essays on Money and Finance: Evidence for China
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Huang, J. (2019). Essays on Money and Finance: Evidence for China. Duncker & Humblot. https://doi.org/10.3790/978-3-428-55690-8
Huang, Jiajin. Essays on Money and Finance: Evidence for China. Duncker & Humblot, 2019. Book. https://doi.org/10.3790/978-3-428-55690-8
Huang, J (2019): Essays on Money and Finance: Evidence for China, Duncker & Humblot, [online] https://doi.org/10.3790/978-3-428-55690-8
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Essays on Money and Finance: Evidence for China
Volkswirtschaftliche Schriften, Vol. 571
(2019)
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About The Author
Jiajin Huang got his PhD in Goethe University in Frankfurt, Germany, and is now working for a Chinese official think-tank in Shanghai. His main research interests focus on monetary and financial issues regarding China´s Economy.Abstract
This book investigates and resolves some financial and monetary questions regarding Chinese economy. The first chapter examines the role of informal financing in China using a firm-level dataset of manufacture industry, and finds that low-risk informal finance exerts a positive effect on firms’ performance. The second and third chapter focus on the measurement and effect of Chinese monetary policy. The autor establishes a new index by using a state space method, reflecting changes in various monetary instruments, which has both theoretical and empirical advantages. Then he investigates the effect of China‘s monetary policy shocks on its close trading partners in developing Asia with the GVAR method. China’s influence has highly expanded even by monetary policy perspective.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Preface | 5 | ||
| Table of Contents | 7 | ||
| List of Tables | 9 | ||
| Table 1.1: Actual Funds for Investment in Fixed Assets Across the Whole Country (100 Million RMB) | 18 | ||
| Table 1.2: Statistics on Social Financing and its Composition (100 Million RMB) | 20 | ||
| Table 1.3: Share of Different Financial Sources Among Total Assets (%) by Year | 29 | ||
| Table 1.4: Share of Different Financial Sources Among Total Assets (%) by Firm Scale | 31 | ||
| Table 1.5: Share of Different Financial Sources Among Total Assets (%) by Ownership | 32 | ||
| Table 1.6: Interest Expense by Different Types of Firms | 34 | ||
| Table 1.7: Summary Statistics and Correlations | 37 | ||
| Table 1.8: The Effect of Informal Financing on Firm Performance | 40 | ||
| Table 1.9: The Effect of Informal Financing on Firm Performance (IV) | 42 | ||
| Table 2.1: Targeted and Actual Growth Rates of M1 and M2 (2000–2014) | 52 | ||
| Table 2.2: Main Monetary Policy Instruments | 54 | ||
| Table 2.3: 5-Value Monetary Stance: Coding Criteria | 58 | ||
| Table 2.4: Descriptive Statistics | 60 | ||
| Table 2.5: Correlations Between the Variables | 61 | ||
| Table 2.6: The Taylor Rule and McCallum Rule | 65 | ||
| Table 2.7: The Taylor Rule and McCallum Rule with Existing Policy Stance | 66 | ||
| The Taylor Rule and McCallum Rule with Existing Policy Stance | 66 | ||
| Table 2.8: The Taylor Rule and McCallum Rule: Lagged Dependent Variables | 66 | ||
| Table 2.9: The Responsiveness of Monetary Policy Stance (State Space Model) | 67 | ||
| Table 2.10: The Responsiveness of Monetary Policy Stance (Narrative Approach) | 68 | ||
| Table 3.1: Main Monetary Policy Phases | 78 | ||
| Table 3.2: Main Monetary Policy Instruments | 79 | ||
| Table 3.3: Domestic and Foreign Variables Included in the Country-Specific Models | 89 | ||
| List of Figures | 10 | ||
| Figure 1.1: China’s Deposit and Lending Rate | 25 | ||
| Figure 2.1: Lending Rate and Deposit Rate | 53 | ||
| Figure 2.2: Chinese Monetary Policy Stance (State Space Method) | 56 | ||
| Figure 2.3: Chinese Monetary Policy Stance (Narrative Approach) | 59 | ||
| Figure 2.4: The Effect of Different Monetary Policy Measurements | 70 | ||
| Figure 3.1: Chinese Monetary Policy Stance (State Space Method) | 81 | ||
| Figure 3.2: China-, Japan-, and US’s Trade-Shares in ASEAN-5’s Total Trade (1980–2012) | 83 | ||
| Figure 3.3 Co-Movements Between ASEAN-5 and China GDP Growth (10-Year Moving Correlation of Annual Growth Rates) | 85 | ||
| Figure 3.4: The Effect of Positive Shock to China’s Real GDP | 92 | ||
| Figure 3.5: The Effect of Positive (One Standard Error) Shock to Chinese Monetary Stance on Real Output | 93 | ||
| Figure 3.6: The Effect of Positive (One Standard Error) Shock to Chinese Monetary Stance on Inflation | 94 | ||
| Figure 3.7: The Effect of Negative (One Standard Error) Shock to China’s Exchange Rate on Exchange Rate | 95 | ||
| Figure 3.8: The Effect of Negative (One Standard Error) Shock to China’s Exchange Rate on GDP | 97 | ||
| Figure 3.9: The Effect of Positive (One Standard Error) Shock to Chinese Monetary Stance on Real Output (1995 Trading Volume) | 98 | ||
| Figure 3.10: The Effect of Positive (One Standard Error) Shock to Chinese Monetary Stance on Inflation (1995 Trading Volume) | 99 | ||
| Introduction | 11 | ||
| Chapter 1: Financial Sources and Economic Growth: Firm-Level Evidence from Chinese Manufacturing Industry | 13 | ||
| 1.1 Introduction | 13 | ||
| 1.2 Firms’ Financing Sources | 17 | ||
| 1.2.1 Aggregate Level | 17 | ||
| 1.2.2 Formal Financial System | 19 | ||
| 1.2.3 Alternative Financial Sector | 21 | ||
| 1.2.4 Interest Rate Regulation and My Classification | 24 | ||
| 1.3 Data Description and Summary Statistics | 26 | ||
| 1.3.1 Different Financing Sources | 28 | ||
| 1.3.2 Interest Expense Rate | 32 | ||
| 1.3.3 Comparison with Existing Literature | 35 | ||
| 1.3.4 Firm Performance and Control Variables | 36 | ||
| 1.4 Informal Financing and Firm Performance | 38 | ||
| 1.4.1 Endogeneity of Informal Financing Decision | 39 | ||
| 1.5 Empirical Results | 40 | ||
| 1.5.1 Informal Finance and Firm Performance | 40 | ||
| 1.5.2 Informal Finance and Firm Performance: Instrumental Variable | 41 | ||
| 1.6 Conclusion | 43 | ||
| Chapter 2: An Evaluation of Different Measures of the Chinese Monetary Policy Stance | 44 | ||
| 2.1 Introduction | 44 | ||
| 2.2 Literature Review | 47 | ||
| 2.3 Different Measurements of Chinese Monetary Policy Stance | 50 | ||
| 2.3.1 Quantitative and Price Measurement | 50 | ||
| 2.3.1.1 Monetary Aggregate | 50 | ||
| 2.3.1.2 Interest Rate | 51 | ||
| 2.3.2 A Combination of Various Monetary Policy Instruments | 54 | ||
| 2.3.3 Narrative Approach | 57 | ||
| 2.4 Data | 58 | ||
| 2.5 The Responsiveness of Monetary Policies | 62 | ||
| 2.5.1 Estimation Methodology for Discrete Index | 63 | ||
| 2.5.2 Findings and Analysis | 64 | ||
| 2.6 Estimated Response to Monetary Policy Shock | 68 | ||
| 2.7 Conclusion | 70 | ||
| Appendix | 71 | ||
| A. An Example of Administrative Guiding | 71 | ||
| B. Details of Narrative Approach | 72 | ||
| Chapter 3: China’s Monetary Policy and its Impact on Developing Asia: A GVAR Approach | 74 | ||
| 3.1 Introduction | 74 | ||
| 3.2 China’s Monetary Policy | 76 | ||
| 3.2.1 A New Measure of Monetary Policy Stance | 76 | ||
| 3.2.2 Exchange Rate Regime | 82 | ||
| 3.3 China and Asia Countries | 83 | ||
| 3.4 Method | 84 | ||
| 3.4.1 Theoretical Framework | 86 | ||
| 3.5 Data and VARX Setups | 88 | ||
| 3.5.1 Data | 88 | ||
| 3.5.2 Tests | 90 | ||
| 3.5.2.1 Unit Root Tests | 90 | ||
| 3.5.2.2 Test Weak Exogeneity | 90 | ||
| 3.6 Impulse Response Analysis | 90 | ||
| 3.6.1 Positive Shock to China’s Real GDP | 91 | ||
| 3.6.2 China’s Monetary Expansion Shock | 91 | ||
| 3.6.3 RMB Devaluation Shock | 95 | ||
| 3.6.4 An Increasing Impact of China’s Monetary Policy | 98 | ||
| 3.7 Conclusion | 100 | ||
| References | 101 | ||
| List of Original Working Papers | 105 | ||
| Subject Index | 106 |