The Impact of Credit Control and Interest Rate Regulation on the Transforming Chinese Economy: An Analysis of Long-Run Effects

Fung, Michael Ka Yiu; Ho, Wai-Ming; Zhu, Ling

doi:10.1006/jcec.2000.1655

Cited by 14 publications

(8 citation statements)

References 25 publications

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“…Prior studies have also shown that other aspects of the institutions in a country, besides bankruptcy law and culture, can be associated with both bankruptcy laws and culture, on the one hand, and the level of entrepreneurial activity in a country, on the other. These other dimensions of a country’s institutional context include the level of business regulation (van Stel et al, 2007), credit market controls (Fung et al, 2000), and the strength of legal system and property rights regime (Johnson et al, 2006). To control for the possible impact that these other dimensions of institutions can have on the relationship between bankruptcy laws, culture, and entrepreneurial activity, data on these variables were taken from the Economic Freedom of the World Index and included in the models.…”

Section: Methodsmentioning

confidence: 99%

Do Stringent Bankruptcy Laws Always Deter Entrepreneurial Activities? A Study of Cultural Influences

Damaraju

Barney

Dess

2020

Entrepreneurship Theory and Practice

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Stringent bankruptcy laws are generally understood to increase the costs of failure and thus not conducive for entrepreneurship. In this paper, theory is developed and tested exploring the moderating influences of the dimensions of culture—individualism—collectivism, masculinity–femininity, uncertainty avoidance, and power distance. Results of this study, from conditional fixed effects Poisson regressions, support that stringent bankruptcy laws are positively associated with the levels of entrepreneurial activity in certain cultural contexts.

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Section: Methodsmentioning

confidence: 99%

Do Stringent Bankruptcy Laws Always Deter Entrepreneurial Activities? A Study of Cultural Influences

Damaraju

Barney

Dess

2020

Entrepreneurship Theory and Practice

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“…In studying the management of money supply, Yu and Xie (1999) found that monetary policy could be carried out by the People's Bank of China, that reforms were needed to control the monetary base, and that the multiplier was statistically predictable for estimating output. Fung et al (2000Fung et al ( , 2001 evaluated long-run impacts of monetary and fiscal policies on inflation and economic growth. They found that a lower government bond yield would lead to a lower inflation without affecting growth, that a higher deposit interest rate was expected to cause a higher inflation rate and a lower economic growth rate, that there was little real impact if rates on bank loans were changed, and that fewer bank loans for state-owned enterprises lowered inflation and output growth.…”

Section: Literature Surveymentioning

confidence: 99%

Impacts of Monetary, Fiscal and Exchange Rate Policies on Output in China: A Var Approach

Hsing

Hsieh

2004

Econ Change

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Applying the VAR model and using the interest rate as a monetary policy variable, we find that in the long run, output in China responds negatively to a shock to the interest rate, the real exchange rate, government debt, or the inflation rate, and it reacts positively to a shock to government deficits or lagged own output. When real M2 is chosen as a monetary policy variable, long-term output in China responds positively to a shock to real M2 or lagged own output, and it reacts negatively to a shock to the real exchange rate, government debt, or government deficits. Its response to a shock to the inflation rate is negative when government debt is used and is positive when government deficits are considered. In the short run, fiscal policy is more important than monetary policy in three out of four cases. In the long run, monetary policy is more influential than fiscal policy in three out of four cases. Therefore, the government may consider conducting monetary and fiscal policies differently in the short run and long run. The government needs to be cautious in pursuing deficit spending as its long-term impacts depend on the monetary variable employed. The policy of maintaining a relatively stable exchange rate is appropriate as the depreciation of the Yuan may hurt the economy in the short run. Copyright Springer 2004exchange rates, government debt and deficits, impulse response functions, monetary policy, VAR, variance decompositions,

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“…Even since 1998 the authorities have continued to issue strict guidelines on bank lending (Fung et al 2000). The so-called window guidance policy -which has nothing to do with the price mechanism but instead contains pure quantitative restrictions on bank lending and hence considerably reduces the price sensitivity of banks' activities -is still actively used by the PBC.…”

Section: Literature Reviewmentioning

confidence: 99%

Has the Chinese economy become more sensitive to interest rates? Studying credit demand in China

Koivu

2009

China Economic Review

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Chinese authorities have traditionally relied mainly on administrative and quantitative measures in conducting monetary policy, with interest rates playing a less prominent role. Additional support for this view resides in a number of earlier studies that have found that the impact of interest rates on the real economy has been miniscule. However, taking into account numerous reforms in the financial sector and more widely in the Chinese economy, interest rates may have gained some influence in the last few years. It is important to study the effectiveness of interest rates also in light of future reforms of the monetary policy tools in China. Whereas administrative policy measures were effective in guiding the behaviour of state-owned enterprises, the authorities may need to increase the use of more market-oriented monetary policy tools as the share of the economy in private and foreign ownership grows. We use a vector error correction model to study, within a credit demand framework, whether the impact of interest rates in China has become stronger over the last decade. Our results suggest that loan demand has indeed become more dependent on interest rates, albeit the channel from interest rate to the real economy is still weak.

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The Impact of Credit Control and Interest Rate Regulation on the Transforming Chinese Economy: An Analysis of Long-Run Effects

Cited by 14 publications

References 25 publications

Do Stringent Bankruptcy Laws Always Deter Entrepreneurial Activities? A Study of Cultural Influences

Do Stringent Bankruptcy Laws Always Deter Entrepreneurial Activities? A Study of Cultural Influences

Impacts of Monetary, Fiscal and Exchange Rate Policies on Output in China: A Var Approach

Has the Chinese economy become more sensitive to interest rates? Studying credit demand in China

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