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JACIII Vol.28 No.3 pp. 494-501
doi: 10.20965/jaciii.2024.p0494
(2024)

Research Paper:

The Micro-Effect of Monetary Policy on the Misallocation of Credit

Fan Wu*,† and Ridong Hu**

*College of Economics and Finance, Huaqiao University
No.269 Chenghua North Road, Quanzhou, Fujian 362021, China

Corresponding author

**Institute of Quantitative Economics, Huaqiao University
No.668 Jimei Avenue, Jimei District, Xiamen, Fujian 361021, China

Received:
September 13, 2023
Accepted:
November 8, 2023
Published:
May 20, 2024
Keywords:
monetary policy shock, heterogeneous enterprise, credit allocation
Abstract

The structural effects of monetary policy and these effects impact on credit allocation are crucial facets of monetary policy research. This study initially estimates China’s monetary policy based on the GDP growth target and CPI target found in the Chinese Government’s Annual Work Report. Subsequently, it quantifies the extent of credit misallocation among Chinese firms using data from listed companies from the years 2013 to 2022. Finally, we empirically investigate the repercussions of expansionary monetary policy shocks on credit misallocation, focusing on micro-firms. Empirical findings reveal that expansionary monetary policy significantly exacerbates credit misallocation, particularly in underfinanced firms. Mechanistic analysis suggests that a preference for loan size in lending behavior constitutes a major factor contributing to credit misallocation among firms.

Cite this article as:
F. Wu and R. Hu, “The Micro-Effect of Monetary Policy on the Misallocation of Credit,” J. Adv. Comput. Intell. Intell. Inform., Vol.28 No.3, pp. 494-501, 2024.
Data files:
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Last updated on Jul. 12, 2024