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How much informal credit lending responded to monetary policy in China? The case of Wenzhou
Institution:1. Department of Economics, School of Oriental and African Studies, University of London, Thornhaugh Street, Russell Square, London WC1H 0XG, UK;2. Financial Market Department, People''s Bank of China, 32 Chengfang Street, West District, Beijing 100800, PR China;3. Research Institute of Finance and Banking, People''s Bank of China, 32 Chengfang Street, West District, Beijing 100800, PR China;1. Syntax, Typology, and Information Structure Group, Max-Planck-Institute for Psycholinguistics, Wundtlaan 1, 6525 XD Nijmegen, The Netherlands;2. Department of Linguistics, School of Oriental and African Studies, University of London, Thornhaugh Street, Russell Square, London WC1H 0XG, United Kingdom;1. Department of Economics, University of Basel, Switzerland, and Federal Reserve Bank of St.Louis, USA;2. Department of Economics, University of California, Irvine, Experimental Social Science Laboratory, USA;3. Department of Economics, University of California, Irvine, USA;1. University of London, Financial and Management Studies, United Kingdom;2. The University of York, Department of Economics and Related Studies, York, United Kingdom;3. The Chinese University of Hong Kong, Institute of Global Economics and Finance, Hong Kong;4. ADB Institute, Tokyo, Japan
Abstract:This study investigates empirically what the major factors are which have driven Wenzhou's informal credit market and how much that market is responsive to monetary policies and the formal banking conditions nationwide. A number of relatively stable factors have been identified from this volatile market through a careful exploration of a monthly survey data set for the period of 2003–2011. The main findings are: (i) Wenzhou's informal credit lending rates are highly receptive to monetary policies; (ii) Wenzhou's market is dominantly demand driven; (iii) Wenzhou's informal lending is substitutive to bank savings in the short run but complementary to banking lending in the long run; and (iv) Wenzhou's market is complementary to excessive investments in the local real estate market.
Keywords:Informal credit market  Monetary policy
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