Loan Gradient of Production Chain and Quality and Efficiency of Monetary Policy Transmission
In recent years,China's financial aggregate indicators,including loans,have been expanding rapidly,but the response of the real economy has not been adequate.This paper takes the loan gradient of production chain as an entry point to give a new explanation for China's poor monetary policy transmission.The loan gradient of production chain re-fers to the fact that under China's industrial structure of large state-owned enterprises monopolizing upstream and small private enterprises competing downstream,banks will issue more loans to upstream enterprises.This paper adopts the methods of theoretical analysis and empirical analysis to study how the loan gradient of production chain affects the effi-ciency of monetary policy.Firstly,this paper constructs a theoretical model that includes upstream and downstream enter-prises,in which the output of upstream enterprises is the raw material input of downstream enterprises,and there is a pro-duction linkage between upstream and downstream enterprises.In this theoretical model,we reflect the efficiency of mon-etary policy transmission through the industrial investment and financial investment activities of enterprises when mon-etary policy conditions change.Then,based on the data of A-share listed companies from 2006 to 2020,we test the exis-tence of the loan gradient of production chain and the heterogeneous impact of monetary policy on investment activities at different locations of the production chain.Finally,based on the mediation effect model,we test the induced demand mechanism of the effect of the loan gradient of production chain on the efficiency of monetary policy transmission.It is found that the loan gradient of production chain exists and that under easy monetary policy conditions,banks will issue more loans to upstream enterprises and less to downstream enterprises.Upstream enterprises do not make more industrial investments,but rather purchase more financial assets.Heterogeneity analysis reveals that this phenomenon is prominent after entering the new development stage and is not evident before the new development stage.This phenom-enon is mainly concentrated in regions with higher government pressure to stabilize economic growth and lower levels of marketization,as well as in industries that are more capital-intensive and not the focus of industrial policy support.In terms of the mechanism,induced demand is an important channel through which the loan gradient affects the efficiency of monetary policy transmission.Insufficient monetary policy support for downstream enterprises constrains downstream enterprises'demand for upstream enterprises,undermines the effect of monetary policy in stimulating upstream enter-prises'industrial investment,and stimulates upstream enterprises'financialization tendencies.Compared with the existing studies,this paper has three theoretical contributions.First,it proposes a new mecha-nism by which vertical production structure affects monetary policy transmission.This paper further enhances the analy-sis conducted by Cun et al.(2022)by using induced demand as an entry point to analyze the mechanism by which the loan gradient of production chain affects monetary policy transmission.Second,it expands the research perspective on the economic consequences of bank size and preference for ownership.The existing literature on the impact of bank size and preference for ownership on the quality and efficiency of monetary policy transmission treats enterprises as isolated indi-viduals and ignores the distortion of banks'biased loans on the supply-demand relationship between enterprises.This pa-per re-examines bank size and preference for ownership from the vertical production structure,incorporates the supply and demand relationship into the analytical framework,more accurately reflects China's reality,and expands and enriches the research perspectives in this field.Third,it reveals the law and new features of money supply and demand in the con-text of high-quality development,which is enlightening for dredging the channels of funds into the real economy.
Production ChainLoan GradientVertical Production StructureMonetary Policy
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