HenU/INFER Workshop on Applied Macroeconomics 5.5
Program
November 6th - Day 2
Parallel Session 5 A - Firm-level Evidence from China
03:00 PM - 04:30 PM
Prof. Helmut Lütkepohl
Free University of Berlin
Special Guest Star Chair
Does Targeted Monetary Policy Affect the Innovation of Small and Micro-enterprises? Evidence from China
Qi Liu - Southeast University
Bin Dong - Southeast University
03:00 PM - 03:30 PM
Does targeted monetary policy affect the innovation of small and micro-enterprises? Evidence from China
Qi Liu / Bin Dong (Southeast University, Nanjing)
Recently, central banks around the world have experimented with targeted monetary policy to support certain sectors in the real economy. However, the effectiveness of targeted monetary policy in emerging markets, such as China, has been paid little attention. Targeted reserve requirement ratio cut (TRRRC) policy is a targeted monetary policy to promote the development of small and micro-enterprises (SMEs) in China. This paper uses Chinese NEEQ-Listed companies in 2007-2018 to explore the effect of the TRRRC policy on SMEs’ innovation in a difference-in-differences framework. The results show that: (1) The TRRRC policy significantly promotes SMEs’ innovation, and this relationship holds after a series of robustness tests; (2) Our findings are particularly pronounced in subsamples with non-SOEs, high-tech industries and superior local financial technology (fintech) development; (3) The mechanism test indicates that the financing constraints is an important channel that affects SMEs’ innovation. These results suggest that the targeted monetary policy can stimulate innovation in SMEs by exerting targeted credit supply, thus achieving transformation and upgrading of the economic structure in a transition economy.
Under the Same Roof? The Green Belt and Road Initiative and Firms’ Heterogeneous Responses
Mingming Jiang - Shandong University
Jianhong Qi - Shandong University
Zhitong Zhang - Shandong University
03:30 PM - 04:00 PM
Under the Same Roof? The Green Belt and Road Initiative and Firms’ Heterogeneous Responses
Mingming Jiang / Jianhong Qi / Zhitong Zhang (Shandong University)
The Belt and Road Initiative has been a core strategy of the Chinese government in recent years. It promotes economic growth and employment of the countries along the routes but causes environmental concerns at the same time. As an effort to balance the economic development and environmental harmony in these countries, China launched the Green Belt and Road policy in 2017. This paper, taking the implementation of this policy as a quasi-natural experiment, employs a difference-in-difference method to identify the policy impacts on the Chinese outward direct investment (ODI) firms. We find a significant and robust role of the green policy improving firms’ performance. Through the unique perspective of the green Belt and Road Initiative, we find that the seemingly similar impacts of the policy shock actually conceal distinct responses of state-owned and non-state-owned enterprises. This difference is deeply rooted in the character of the Chinese economy in the past and sheds light on the direction of future reforms.
Tariff Reduction, Productivity and Wages: the Firm-level Evidence from China
Qianqian Wang - Henan University
04:00 PM - 04:30 PM
Tariff Reduction, Productivity and Wages: the Firm-level Evidence from China
Qianqian Wang (Henan University)
This paper studies the effect of tariff reduction and productivity on wages. A detailed firm-level dataset has been constructed by combining the manufacturing, product-level transaction trade data, and industry-level tariff data from China. We use a unconditional quantile regression and Oaxaca-Blinder decomposition with RIF regressions to analyze the effects of input, ouput tariff reductions and total factor productivity (TFP) on wages. Results indicate that input tariff reduction would increase wages, but has a negative effect on wages at the 10th and 90th percentile with full removal of trading licenses since year 2005; the output tariff reduction has an opposite effect; the TFP increases wages, with the input tariff reduction, the effect of TFP would be stronger on the 90th percentile of wage distribution after year 2005, and with the output tariff reduction, the effect of TFP would be stronger on the 10th percentile. The results are robust under different examinations.
Parallel Session 5 B - Bayesian VAR
03:00 PM - 04:30 PM
Prof.Barbara Rossi
Universidad Pompeu Fabra
Special Guest Star Chair
What Goes Around Comes Around: How Large are Spillbacks from US Monetary Policy?
Maximilian Breitenlechner - University of Innsbruck
Georgios Georgiadis - European Central Bank
Ben Schumann - Free University of Berlin
03:00 PM - 03:30 PM
What goes around comes around: How large are spillbacks from US monetary policy?
Maximilian Breitenlechner (University of Innsbruck) / Georgios Georgiadis (European Central Bank) / Ben Schumann (Free University of Berlin)
We quantify spillbacks from US monetary policy based on structural scenario analysis and minimum relative entropy methods applied in a Bayesian proxy structural vector-autoregressive model estimated on data for the time period from 1990 to 2019. We find that spillbacks account for a non-trivial share of the overall slowdown in domestic real activity in response to a contractionary US monetary policy shock. Our analysis suggests that spillbacks materialise as Tobin's q/cash flow and stock market wealth effects impinge on US investment and consumption. In particular, contractionary US monetary policy depresses foreign sales of US firms, which reduces their valuations/cash flows and thereby induces cutbacks in investment. Similarly, as contractionary US monetary policy depresses US and foreign equity prices, the value of US households' portfolios is reduced, which triggers a drop in consumption. Net trade does not contribute to spillbacks because US monetary policy affects exports and imports similarly. Finally, spillbacks materialise through advanced rather than through emerging market economies, consistent with their relative importance in US firms' foreign demand and US foreign equity holdings.
Current Account Imbalance and Financial Accelerator Asymmetry-A Two-Country DSGE Model with Risk Shocks
Tao Jin - Tsinghua University
Simon Kwok - The University of Sydney
Xin Zheng - Tsinghua University
03:30 PM - 04:00 PM
Current Account Imbalance and Financial Accelerator Asymmetry-A Two-Country DSGE Model with Risk Shocks
Tao Jin (Tsinghua University) / Simon Kwok (The University of Sydney) / Xin Zheng (Tsinghua University)
We examine financial acceleration asymmetry between state-owned enterprises (SOEs) and privately-owned enterprises (POEs) in the Chinese economy. We construct and estimate a DSGE model, which accommodates SOEs and POEs, to capture asymmetric amplification and propagation of financial frictions upon SOEs and POEs. On one hand, economic frictions, which include imperfect competition, price stickiness, and investment adjustment cost, propagate through manufacturing production. On the other hand, financial frictions, which incorporate asymmetric information and costly monitoring, transfer via corporate finance. We gauge financial acceleration mechanisms of SOEs and POEs by measuring and comparing their respective macroeconomic responses towards shocks between two scenarios, namely, the existence and inexistence of monitoring cost. Our methodologies consist of Bayesian estimation, Bayesian model comparison, impulse response analysis, historical decomposition, forecast error variance decomposition, and counterfactual analysis. We find the extent of asymmetric financial acceleration, which originates from domestic and foreign financial frictions, hinges on both the size of monitoring cost and the magnitude of leverage ratio. Consequently, asymmetric financial acceleration exits between SOEs and POEs due to their differences in monitoring cost and leverage ratio.
How Do Credit Supply and Demand Influence Business Cycle Dynamics?
Christiane Baumeister - University of Notre Dame
Gregor von Schweinitz - IWH Halle / Leipzig University
04:00 PM - 04:30 PM
How do credit supply and demand influence business cycle dynamics?
Christiane Baumeister (University of Notre Dame) / Gregor von Schweinitz (IWH Halle / Leipzig University)
This paper quantifies the relative importance of credit demand and credit supply shocks in determining fluctuations in credit variables and the business cycle. We extend Bayesian structural VARs with informative priors on structural coefficients to allow for the case of multiple external instruments. As a new instrument for credit demand, we construct a granular instrument based on regional mortgage origination. We find that credit demand is quite elastic with respect to contemporaneous macroeconomic conditions, while credit supply is relatively inelastic. Both shocks together account for around 50\% of the variation of output, inflation and risk-free interest rates. However, their relative importance varies over time: credit demand mostly drove the boom prior to financial crisis, while credit supply shocks were responsible during the crisis itself.