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The Long-Run Trend of Residential Investment in China

Ding Ding, Weicheng Lian, Oct 09, 2019

Residential investment has been a key growth engine for China in the last two decades. Total housing investment grew from about 4 percent of GDP in 1997 to a peak of 15 percent of GDP in 2014, with residential investment accounting for more than two-thirds of it. Our analysis indicates that structural changes in the Chinese economy that led to rebalancing toward consumption...

When History Matters Little: Political Hierarchy and Regional Development in China, AD 1000-2000

Ying Bai, Ruixue Jia, Jan 09, 2019

Regime changes in China between AD 1000 and 2000 systematically altered the relative importance of different regions in the political hierarchy of that time. The evolution of Chinese provincial capitals and economic activities during this period throws light on how political factors shape economic geography. Employing a panel dataset...

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...

Pushing on a String: State-Owned Enterprises and Monetary Policy Transmission in China

Peter Tillmann, Hongyi Chen, Apr 18, 2018

In China, a large share of enterprises is state-owned and has preferential access to finances. This should affect the way the economy responds to changes in monetary policy. We find that a policy easing is more effective than a policy tightening – which is consistent with the PBC being able to “push on a string”.

Leverage-Induced Fire Sales and Stock Market Crashes

Jiangze Bian, Zhiguo He, Kelly Shue, Hao Zhou, Dec 03, 2018

The authors find that margin investors heavily sell their holdings when their account-level leverage edges toward the maximum leverage limits. Stocks that are disproportionately held by accounts close to leverage limits experience high selling pressure and abnormal price declines that subsequently reverse over the next 40 trading days. Unregulated shadow-financed margin accounts contributed more to the market crash even though these shadow accounts had higher leverage limits and held a smaller fraction of market assets.