China’s market economy, shadow banking and the frequency of growth slowdown
The activity of the Shadow Banks in China has been the subject of considerable interest in recent years. Total shadow banking lending has reached over 60% of GDP and has grown faster than regular bank lending. It has been argued that unregulated shadow banking has fuelled a credit boom that poses a...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
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2020
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| Online Access: | https://eprints.nottingham.ac.uk/60863/ |
| _version_ | 1848799815703461888 |
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| author | Le, Vo Phuong Mai Matthews, Kent Meenagh, David Minford, Patrick Xiao, Zhiguo |
| author_facet | Le, Vo Phuong Mai Matthews, Kent Meenagh, David Minford, Patrick Xiao, Zhiguo |
| author_sort | Le, Vo Phuong Mai |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | The activity of the Shadow Banks in China has been the subject of considerable interest in recent years. Total shadow banking lending has reached over 60% of GDP and has grown faster than regular bank lending. It has been argued that unregulated shadow banking has fuelled a credit boom that poses a risk to the stability of the financial system. This paper estimates a model of the Chinese economy using a DSGE framework that accommodates a banking sector that isolates the effects of lending to the private sector including shadow bank lending. A refinement of the model allows for bank lending including lending by the shadow banks to affect the credit premium on private investment. The main finding is that while financial shocks are significant, it is real shocks that dominate. The model is used to simulate the frequency of growth slowdowns in China and concludes that these are more likely to be driven by real sector shocks rather than financial sector, including shadow bank shocks. This paper differs from other applications in its use of indirect inference to test the fitted model against a threeequation VAR of inflation, output gap and interest rate. |
| first_indexed | 2025-11-14T20:41:40Z |
| format | Article |
| id | nottingham-60863 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-14T20:41:40Z |
| publishDate | 2020 |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-608632020-06-10T08:55:58Z https://eprints.nottingham.ac.uk/60863/ China’s market economy, shadow banking and the frequency of growth slowdown Le, Vo Phuong Mai Matthews, Kent Meenagh, David Minford, Patrick Xiao, Zhiguo The activity of the Shadow Banks in China has been the subject of considerable interest in recent years. Total shadow banking lending has reached over 60% of GDP and has grown faster than regular bank lending. It has been argued that unregulated shadow banking has fuelled a credit boom that poses a risk to the stability of the financial system. This paper estimates a model of the Chinese economy using a DSGE framework that accommodates a banking sector that isolates the effects of lending to the private sector including shadow bank lending. A refinement of the model allows for bank lending including lending by the shadow banks to affect the credit premium on private investment. The main finding is that while financial shocks are significant, it is real shocks that dominate. The model is used to simulate the frequency of growth slowdowns in China and concludes that these are more likely to be driven by real sector shocks rather than financial sector, including shadow bank shocks. This paper differs from other applications in its use of indirect inference to test the fitted model against a threeequation VAR of inflation, output gap and interest rate. 2020-05-07 Article PeerReviewed application/pdf en cc_by https://eprints.nottingham.ac.uk/60863/1/manc.12318.pdf Le, Vo Phuong Mai, Matthews, Kent, Meenagh, David, Minford, Patrick and Xiao, Zhiguo (2020) China’s market economy, shadow banking and the frequency of growth slowdown. The Manchester School . ISSN 1463-6786 DSGE model; China; crises; indirect inference; shadow banking http://dx.doi.org/10.1111/manc.12318 doi:10.1111/manc.12318 doi:10.1111/manc.12318 |
| spellingShingle | DSGE model; China; crises; indirect inference; shadow banking Le, Vo Phuong Mai Matthews, Kent Meenagh, David Minford, Patrick Xiao, Zhiguo China’s market economy, shadow banking and the frequency of growth slowdown |
| title | China’s market economy, shadow banking and the frequency of growth slowdown |
| title_full | China’s market economy, shadow banking and the frequency of growth slowdown |
| title_fullStr | China’s market economy, shadow banking and the frequency of growth slowdown |
| title_full_unstemmed | China’s market economy, shadow banking and the frequency of growth slowdown |
| title_short | China’s market economy, shadow banking and the frequency of growth slowdown |
| title_sort | china’s market economy, shadow banking and the frequency of growth slowdown |
| topic | DSGE model; China; crises; indirect inference; shadow banking |
| url | https://eprints.nottingham.ac.uk/60863/ https://eprints.nottingham.ac.uk/60863/ https://eprints.nottingham.ac.uk/60863/ |