The Unintended Consequences of Regulation: Evidence from China’s Interbank Market Xian Gu, Lu Yun, Jun 12, 2019 Financial regulation can have unanticipated consequences in the financial system. The evidence from China’s interbank market shows that banks tend to use newly introduced and lightly regulated financial instruments to get around regulation during their search for funds. Banks facing greater competition or higher liquidity shortages have more incentives to engage in such activities. Such interbank activities are closely associated with banks’ proprietary trading, suggesting the potential risk of financial contagion.
Industry/Policy View The Impact of US-China Trade Tensions Eugenio Cerutti, Gita Gopinath, Adil Mohommad, Jun 05, 2019 US-China trade tensions have negatively affected consumers as well as many producers in both countries. The tariffs have reduced trade between the US and China, but the bilateral trade deficit remains broadly unchanged. While the impact on global growth is relatively modest at this time, the latest escalation could significantly dent business and financial market sentiment, disrupt global supply chains, and jeopardize the projected recovery in global growth in 2019.
The Reference Effect of Government Bonds on Corporate Borrowing Costs Mark J. Flannery, Claire Yurong Hong, Baolian Wang, May 29, 2019 It has been widely argued that government bonds can be used as a reference point for pricing corporate bonds. This “reference” role can reduce the cost of corporate borrowing. The authors study this question by examining a unique experiment in China. China issued two sovereign bonds denominated in U.S. dollars (USD) in October 2017, the first...
The Effect of Pollution and Heat on the Productivity of High-Skill Public Sector Workers in China Matthew E. Kahn, Pei Li, May 22, 2019 The quality of governance depends on public sector worker productivity. We use micro data from China to document that judges are less productive on polluted days. We find that public sector productivity elasticities are larger than the published estimates of private sector productivity elasticities with respect to pollution.
The Demand for Reverse Mortgages in China Katja Hanewald, Hazel Bateman, Hanming Fang, Shang Wu, May 15, 2019 Reverse mortgages are financial products that allow older homeowners to live in their property and receive income for as long as they live; repayment is made from the proceeds of the property sales upon the homeowners’ death. A recent pilot program in China by Happy Life Insurance found almost no takeup of such products. We investigate whether, if reverse...