Shadow banking activity and entrusted loans in a DSGE model of China
This paper examines how the risky lending activities of the state‐owned enterprises (SOEs) affect the effectiveness of monetary and fiscal policy in China with a shadow banking sector. We develop a dynamic stochastic general equilibrium (DSGE) macroeconomic model with two production sectors, where t...
| 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/60864/ |
| _version_ | 1848799815982383104 |
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| author | Wang, Chaowei Mai Le, Vo Phuong Matthews, Kent Zhou, Peng |
| author_facet | Wang, Chaowei Mai Le, Vo Phuong Matthews, Kent Zhou, Peng |
| author_sort | Wang, Chaowei |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | This paper examines how the risky lending activities of the state‐owned enterprises (SOEs) affect the effectiveness of monetary and fiscal policy in China with a shadow banking sector. We develop a dynamic stochastic general equilibrium (DSGE) macroeconomic model with two production sectors, where the SOEs have access to low cost funds from the commercial banks (also mainly state‐owned) and on‐lend to the private sector in the form of entrusted loans. The Bayesian estimation results show that higher restrictions on bank credit push SOEs to engage in more shadow banking in this form which dampens the effectiveness of contractionary monetary policy. Expansionary fiscal policy increases output, but crowds out private investment, which can further drain the financial market and exert a detrimental effect on the Chinese economy. |
| first_indexed | 2025-11-14T20:41:40Z |
| format | Article |
| id | nottingham-60864 |
| 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-608642020-06-10T00:58:31Z https://eprints.nottingham.ac.uk/60864/ Shadow banking activity and entrusted loans in a DSGE model of China Wang, Chaowei Mai Le, Vo Phuong Matthews, Kent Zhou, Peng This paper examines how the risky lending activities of the state‐owned enterprises (SOEs) affect the effectiveness of monetary and fiscal policy in China with a shadow banking sector. We develop a dynamic stochastic general equilibrium (DSGE) macroeconomic model with two production sectors, where the SOEs have access to low cost funds from the commercial banks (also mainly state‐owned) and on‐lend to the private sector in the form of entrusted loans. The Bayesian estimation results show that higher restrictions on bank credit push SOEs to engage in more shadow banking in this form which dampens the effectiveness of contractionary monetary policy. Expansionary fiscal policy increases output, but crowds out private investment, which can further drain the financial market and exert a detrimental effect on the Chinese economy. 2020-05-24 Article PeerReviewed application/pdf en cc_by https://eprints.nottingham.ac.uk/60864/1/manc.12319.pdf Wang, Chaowei, Mai Le, Vo Phuong, Matthews, Kent and Zhou, Peng (2020) Shadow banking activity and entrusted loans in a DSGE model of China. The Manchester School . ISSN 1463-6786 Bayesian estimation; DSGE; entrusted loans; monetary policy; shadow banking; state-owned enterprises http://doi.org/10.1111/manc.12319 doi:10.1111/manc.12319 doi:10.1111/manc.12319 |
| spellingShingle | Bayesian estimation; DSGE; entrusted loans; monetary policy; shadow banking; state-owned enterprises Wang, Chaowei Mai Le, Vo Phuong Matthews, Kent Zhou, Peng Shadow banking activity and entrusted loans in a DSGE model of China |
| title | Shadow banking activity and entrusted loans in a DSGE model of China |
| title_full | Shadow banking activity and entrusted loans in a DSGE model of China |
| title_fullStr | Shadow banking activity and entrusted loans in a DSGE model of China |
| title_full_unstemmed | Shadow banking activity and entrusted loans in a DSGE model of China |
| title_short | Shadow banking activity and entrusted loans in a DSGE model of China |
| title_sort | shadow banking activity and entrusted loans in a dsge model of china |
| topic | Bayesian estimation; DSGE; entrusted loans; monetary policy; shadow banking; state-owned enterprises |
| url | https://eprints.nottingham.ac.uk/60864/ https://eprints.nottingham.ac.uk/60864/ https://eprints.nottingham.ac.uk/60864/ |