TAILIEUCHUNG - Credit expansion and misallocation

In response to the global financial crisis in 2008, the Chinese government launched a 4-trillionyuan economic stimulus plan, which represented a typical episode of government intervention in the economy. This paper analyzed the impact of the stimulus plan, which mainly took the form of bank credit lines, on resource allocation and aggregate productivity. Using manufacturing data from 2001 to 2013, we showed empirically that it pulled up the total demand in the short term, but by extending excessive credit to weak firms, it created resource misallocation and over-capacity in the long term. | Journal of Applied Finance Banking Vol. 10 No. 4 2020 89-113 ISSN 1792-6580 print version 1792-6599 online Scientific Press International Limited Credit Expansion and Misallocation Yuanchen Yang1 and Yangyang Liu2 Abstract In response to the global financial crisis in 2008 the Chinese government launched a 4-trillion-yuan economic stimulus plan which represented a typical episode of government intervention in the economy. This paper analyzed the impact of the stimulus plan which mainly took the form of bank credit lines on resource allocation and aggregate productivity. Using manufacturing data from 2001 to 2013 we showed empirically that it pulled up the total demand in the short term but by extending excessive credit to weak firms it created resource misallocation and over-capacity in the long term. This effect was observed after a lag of 3 years and was especially pronounced in resource-based industries. The results carried strong implications for emerging economies that undertook similar stimulus plans and whose financial markets have been plagued by severe frictions. JEL classification numbers G01 G21 G28 Keywords Bank credit Corporate governance Financial crisis 1 People s Bank of China School of Finance Tsinghua University. 2 Harvest Fund. Article Info Received February 21 2020. Revised March 5 2020. Published online May 1 2020. 90 Yuanchen Yang and Yangyang Liu 1. Introduction The financial crisis that swept over the world in 2008 has brought extremely severe negative shocks to the Chinese economy. In 2008 the Chinese government introduced a total of 4-trillion-yuan stimulus policies to tackle the financial crisis of which trillion yuan came from the central government and the rest was local government spending and bank credit lines. It represented the largest economic stimulus in China over the past decade. The impact of the Chinese government s countercyclical credit expansion during the financial crisis has been controversial. Proponents believe that

• Ngân hàng - Tín dụng
• Bank credit
• Corporate governance
• Financial crisis
• Credit expansion
• Created resource misallocation and over capacity
• Agricultural credit
• Jaipur central Co operative bank
• Agricultural credit portfolio
• Growth in agricultural credit portfolio
• Purpose wise short term credit
• Summary of PhD thesis
• Bank credit contributes to the development
• The agricultural economy
• The situation of bank credit
• Agricultural economy development
• Bank funding
• Credit risk
• Liquidity risk
• Bank integrating credit
• Funding optimization
• Collusive corruption
• Principal agent
• Supervision of bank credit
• Induces serious internal collusive corruption
• Summary of the Economics dissertation
• Economics dissertation
• Strengthen access to bank credit capital
• Bank credit capital
• Medium sized enterprises
• Thai Nguyen province
• Industrial structure upgrading
• Technological Innovation
• Threshold model
• Technological innovation mode
• Bank credit control policy
• Evidence from China
• Bank lending
• Firm funding
• Firm investment
• Credit policy
• Determinants of access
• Agricultural households in Vietnam
• Agricultural households
• The determinants of access to bank credit
• Summary of Doctoral dissertation
• Summary of Doctoral dissertation in Economics
• Pangasius value chain
• Credit for pangasius value chain
• Quantitative research
• Panel data
• An empirical insight
• Bank credit risk
• Summary of Doctoral thesis
• Development of export credit
• Export credit
• Vietnam bank for agriculture
• Rural development
• Access to credit
• Farmer based unions
• Farmer based unions facilitate
• Low income households’ access
• Summary of Doctoral thesis in Economics
• Doctoral thesis in Economics
• Contribution of bank credit
• New rural construction
• Banking credit activities
• Business administration Doctoral thesis
• Credit risk management
• Vietnam prosperity joint stock bank
• Prosperity joint stock bank
• Several factors affecting such process
• Cross usage
• Banks and credit unions
• Credit unions
• Bank marketing
• Credit union marketing
• Financial risk components
• Bank risk management
• Credit scoring
• Credit ratings
• Rating system architecture
• Internal rating control committees
• Summary of Economic Doctoral thesis
• Consmer credit development
• Finance companies
• Commercial bank in Vietnam
• Developing consumer credit
• Business administration
• Joint stock bank
• Bank capital
• Access to capital
• Capital situation
• Accessing bank credit
• Small and medium enterprises
• Firm conduct performance
• Capped call
• Bank lending decisions
• Economic PhD dissertation
• Bank credit to SMEs
• Vietnamese unstable macroeconomy
• Domestic macroeconomic instabilities
• Commercial banks
• Vietnam’s commercial banks
• Generalized method of moment
• Markov chain model
• Mover stayer model
• Extended Markov chain model
• Credit risk of bank loans
• Tunisian exporting companies
• Trade credit and bank loan
• 2008 financial crisis
• Burkart and Ellingsen
• Impact of the financial crisis
• Doctoral thesis summary
• Management of bad debts
• Credit activities
• Vietnam joint stock commercial bank
• Industry and trade