Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/175857
Authors: 
Chen, Hongyi
Li, Ran
Tillmann, Peter
Year of Publication: 
2018
Series/Report no.: 
Joint Discussion Paper Series in Economics 06-2018
Abstract: 
This paper studies whether monetary transmission in China is asymmetric. While researchers found an asymmetric transmission in the U.S. and other economies, China offers a specific rationale for asymmetries: the presence of state-owned enterprises (SOEs) enjoying preferential access to financing. To study the consequences of SOEs for policy transmission, we differentiate between expansionary and restrictive policy shocks and argue that SOEs should suffer less from a policy tightening and benefit more from a policy easing. Based on sector-specific macroeconomic time series and a large firm-level data set, we provide evidence of a systematic and sizable asymmetry in the transmission of monetary policy shocks in China. The nature of the asymmetry is consistent with the notion of explicit or implicit government-guarantees of SOEs and has consequences for the adjustment of aggregate variables. In contrast to other central banks, the People's Bank of China seems to be able to "push on a string".
Subjects: 
monetary transmission
state-owned enterprises
financial system
VAR
state-dependent local projections
firm-level data
JEL: 
E32
E44
G32
Document Type: 
Working Paper

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