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Working Paper
What we learn from China's rising shadow banking: exploring the nexus of monetary tightening and banks' role in entrusted lending
Ren, Jue; Zha, Tao; Chen, Kaiji (2016-01-01)
We argue that China's rising shadow banking was inextricably linked to potential balance-sheet risks in the banking system. We substantiate this argument with three didactic findings: (1) commercial banks in general were prone to engage in channeling risky entrusted loans; (2) shadow banking through entrusted lending masked small banks' exposure to balance-sheet risks; and (3) two well-intended regulations and institutional asymmetry between large and small banks combined to give small banks an incentive to exploit regulatory arbitrage by bringing off-balance-sheet risks into the balance ...
FRB Atlanta Working Paper , Paper 2016-1

Working Paper
Macroeconomic Effects of China's Financial Policies
Zha, Tao; Chen, Kaiji (2018-11-01)
The Chinese economy has undergone three major phases: the 1978?97 period marked as the SOE-led economy, the 1998?2015 phase as the investment-driven economy, and the new normal economy since 2016. All three economies have been shaped by the government financial policies, defined as a set of credit policy, monetary policy, and regulatory policy. We analyze the macroeconomic effects of these financial policies throughout the three phases and provide the stylized facts to substantiate our analysis. The stylized facts differ qualitatively across different phases or economies. We argue that the ...
FRB Atlanta Working Paper , Paper 2018-12

Working Paper
Impacts of Monetary Stimulus on Credit Allocation and Macroeconomy: Evidence from China
Waggoner, Daniel F.; Zha, Tao; Higgins, Patrick C.; Chen, Kaiji (2016-09-01)
We develop a new empirical framework to identify and estimate the effects of monetary stimulus on the real economy. The framework is applied to the Chinese economy when monetary policy in normal times was switched to an extraordinarily expansionary regime to combat the impact of the 2008 financial crisis. We show that this unprecedented monetary stimulus accounted for as high as a 4 percent increase of real gross domestic product (GDP) growth rate by the end of 2009. Monetary transmission to the real economy was through bank credit allocated disproportionately to financing investment in real ...
FRB Atlanta Working Paper , Paper 2016-9

Working Paper
Small and orthodox fiscal multipliers at the zero lower bound
Waki, Yuichiro; Korber, Lena Mareen; Braun, R. Anton (2013-12-01)
Does fiscal policy have large and qualitatively different effects on the economy when the nominal interest rate is zero? An emerging consensus in the New Keynesian literature is that the answer is yes. New evidence provided here suggests that the answer is often no. For a broad range of empirically relevant parameterizations of the Rotemberg model of costly price adjustment, the government purchase multiplier is about one or less, and the response of hours to a tax cut is either negative or close to zero.
FRB Atlanta Working Paper , Paper 2013-13

Working Paper
Trends and cycles in China's macroeconomy
Waggoner, Daniel F.; Zha, Tao; Chang, Chun; Chen, Kaiji (2015-06-01)
We make four contributions in this paper. First, we provide a core of macroeconomic time series usable for systematic research on China. Second, we document, through various empirical methods, the robust findings about striking patterns of trend and cycle. Third, we build a theoretical model that accounts for these facts. Fourth, the model's mechanism and assumptions are corroborated by institutional details, disaggregated data, and banking time series, all of which are distinctive Chinese characteristics. We argue that preferential credit policy for promoting heavy industries accounts for ...
FRB Atlanta Working Paper , Paper 2015-5

Working Paper
Monetary Stimulus amid the Infrastructure Investment Spree: Evidence from China's Loan-Level Data
Zha, Tao; Gao, Haoyu; Waggoner, Daniel F.; Higgins, Patrick C.; Chen, Kaiji (2020-08-27)
We study the impacts of the 2009 monetary stimulus and its interaction with infrastructure spending on credit allocation. We develop a two-stage estimation approach and apply it to China's loan-level data that covers all sectors in the economy. We find that except for the manufacturing sector, monetary stimulus itself did not favor state-owned enterprises (SOEs) over non-SOEs in credit access. Infrastructure investment driven by nonmonetary factors, however, enhanced the monetary transmission to bank credit allocated to local government financing vehicles in infrastructure and at the same ...
FRB Atlanta Working Paper , Paper 2020-16

Working Paper
Tell Me Something I Don't Already Know: Learning in Low- and High-Inflation Settings
Meyer, Brent; Coibion, Olivier; Kumar, Saten; Ropele, Tiziano; Gorodnichenko, Yuriy; Kenny, Geoff; Georgarakos, Dimitris; Frache, Serafin; Lluberas, Rodrigo; Weber, Michael; Candia, Bernardo (2023-07-31)
Using randomized control trials (RCT) applied over time in different countries, we study how the economic environment affects how agents learn from new information. We show that as inflation has risen in developed economies, both households and firms have become more attentive and informed about inflation, leading them to respond less to exogenously provided information about inflation and monetary policy. This observation holds for both firms and households. We also study the effects of RCTs in countries where inflation has been consistently high (Uruguay) and low (New Zealand) as well as ...
FRB Atlanta Working Paper , Paper 2023-8

Working Paper
A Framework for Understanding the Vulnerabilities of New Money-Like Products
Perez-Sangimino, JP; Swem, Nathan; McCabe, Patrick E.; Anadu, Kenechukwu E. (2026-06-22)
New money-like products, such as tokenized money market funds (MMFs), money market exchange-traded funds (MMETFs), and stablecoins, could be transformative for finance. These products may offer significant benefits, but like other money-like assets, they also have certain vulnerabilities. We introduce a framework to analyze the vulnerabilities of new products by comparing their features to those that contribute to vulnerabilities in MMFs. Specifically, we examine the extent to which each product engages in liquidity transformation, is subject to threshold effects, serves as a money-like ...
Supervisory Research and Analysis Working Papers , Paper SRA 26-01 (revised)

Working Paper
Monetary Policy Divergence and Net Capital Flows: Accounting for Endogenous Policy Responses
Zlate, Andrei; Davis, J. Scott (2018-09-27)
This paper measures the effect of monetary tightening in key advanced economies on net capital flows around the world. Measuring this effect is complicated by the fact that the domestic monetary policies of affected economies respond endogenously to the foreign tightening shock. Using a structural VAR framework with quarterly panel data we estimate the impulse responses of domestic policy variables and net capital flows to a foreign monetary tightening shock. We find that the endogenous response of domestic monetary policy depends on each economy's capital account openness and exchange rate ...
Supervisory Research and Analysis Working Papers , Paper RPA 18-5

Working Paper
Global Inflation, Regional Factors
Stein, Hillary; Sheremirov, Viacheslav (2025-08-01)
This paper shows that global inflation dynamics have a sizable regional component. Using a balanced panel of 61 countries that starts in 1970, we document that while the global factor, defined as the dominant principal component, explains a large portion of inflation variation in advanced economies, a model with only one principal component is less successful for developing countries. By contrast, a hierarchical dynamic factor model, which includes a global (unconstrained) factor and regional (restricted) factors, performs substantially better for emerging market and developing economies. The ...
Working Papers , Paper 25-6

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