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Will the establishment of city commercial banks improve resource allocation efficiency?–Concurrently on bank risk-taking channels of monetary policy in China

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  • GONG, Xingyu
  • YU, Jintao
  • LUO, Xi

Abstract

Improving resource allocation efficiency is an essential approach to accelerate the construction of a dual circulation development paradigm. This article takes the intensification of heterogeneous competition between local banks caused by the establishment of city commercial banks as a quasi-natural experiment. Based on urban panel data obtained by matching the China Industrial Enterprise Database and the Urban Statistical Yearbook, empirical research finds that the establishment of city commercial banks generally deteriorates resource allocation efficiency. However, after incorporating bank risk-taking channels of monetary policy into the analysis framework, tight monetary policies are conducive to alleviating the deterioration of resource allocation efficiency. Further research indicates that this mitigating effect mainly comes from enterprises with high productivity and strong financial constraints. In the context of global quantitative easing policies, the findings of this article can contribute to a deep understanding of the relationship between banking sectors and resource allocation efficiency and provide significant policy insights for further promoting resource allocation efficiency, improving the pass-through effect of monetary policies, and advancing high-quality development of the banking industry.

Suggested Citation

  • GONG, Xingyu & YU, Jintao & LUO, Xi, 2024. "Will the establishment of city commercial banks improve resource allocation efficiency?–Concurrently on bank risk-taking channels of monetary policy in China," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1513-1526.
    • Handle: RePEc:eee:ecanpo:v:81:y:2024:i:c:p:1513-1526
    DOI: 10.1016/j.eap.2024.02.032
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    More about this item

    Keywords

    City commercial bank; Resource allocation efficiency; Monetary policy; Bank risk-taking;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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