Monetary Stimulus amid the Infrastructure Investment Spree: Evidence from China's Loan-Level Data
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.
Status: Published in 2020
Provider: Federal Reserve Bank of Atlanta
Part of Series: FRB Atlanta Working Paper
Publication Date: 2020-08-27