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Working Paper
Monetary Stimulus amid the Infrastructure Investment Spree: Evidence from China's Loan-Level Data
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 ...
Working Paper
The “Privatization” of Municipal Debt
We study the determinants of local governments’ reliance on bank loans using granular data from the Federal Reserve. Governments that are larger, rely on stable revenue sources, or have higher spending relative to revenues are more likely to borrow from banks. About a third of governments in the top revenue quintile have obtained bank loans since 2011, typically accounting for a fifth of their total debt. Declines in revenues, reductions in bond market access, agency rating downgrades, and relationships with financial advisers and underwriters all strongly predict higher bank loan reliance. ...