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The impact of China’s fiscal and monetary policy responses to the great recession: An analysis of firm-level Chinese data

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  • Xue, Wenjun
  • Yilmazkuday, Hakan
  • Taylor, Jason E.

Abstract

This paper investigates the effects of Chinese financial and fiscal policies designed to counter the worldwide Great Recession of 2008. We examine how policies designed to increase bank credit and health (i.e., asset liquidity, capital adequacy ratio, profitability, and bad loan ratio) influenced firm-level output, employment and investment. We also explore the impact of China’s expansionary fiscal policy with regard to these firm-level variables. We find that the policy effects varied based on firm-level characteristics such as size, liability ratio, profitability, ownership and the industry in which the firm operates. With respect to the dynamic effects, our results suggest that Chinese financial and fiscal policies were generally effective in the short run, but their positive impacts ceased within two years.

Suggested Citation

  • Xue, Wenjun & Yilmazkuday, Hakan & Taylor, Jason E., 2020. "The impact of China’s fiscal and monetary policy responses to the great recession: An analysis of firm-level Chinese data," Journal of International Money and Finance, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:jimfin:v:101:y:2020:i:c:s0261560619304085
    DOI: 10.1016/j.jimonfin.2019.102113
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    More about this item

    Keywords

    Banking system; 2008 economic stimulus plan; The great recession; Chinese recovery; Panel VAR model; Firm-level investigation;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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