活动内容
Topic
Bank
Risk-Taking and Monetary Policy Transmission: Evidence from China
Speaker
Zhiwei Xu
Associate
Professor, Jiaotong University
Abstract
We
present evidence that monetary policy easing reduces bank risk-taking but
lowers aggregate productivity in China after implementing the Basel III capital
regulations in 2013. The new regulations tightened bank capital requirements
and introduced a new risk-weighting approach to calculating the capital
adequacy ratio (CAR). To meet tightened capital requirements, a bank can boost
its effective CAR by raising capital or by increasing the share of lending to
low-risk borrowers. Using confidential loan-level data from a large Chinese
commercial bank, merged with firm-level data on a large set of manufacturing
firms, we document robust evidence that a monetary policy expansion raises the
share of new bank loans to state-owned enterprises (SOEs) after 2013, but not
before, because SOE loans receive high credit ratings under government
guarantees. Since SOEs are on average less productive than private firms,
shifts in bank lending toward SOEs reduces aggregate productivity. We construct
a two-sector general equilibrium model with bank portfolio choices and show
that, under calibrated parameters, an expansionary monetary policy shock raises
the share of bank lending to SOEs, leading to persistent declines
in total factor productivity that partially offset the expansionary effects of
monetary policy.