【RIEM Weekly Seminar NO.357】Bank Wholesale Funding, Monetary Transmission and Systemic Risk: Evidence from China

2021-05-12 341views

Title: Bank Wholesale Funding, Monetary Transmission and Systemic Risk: Evidence from China

Speaker: Dr. Kaiji Chen Emory University in the United States Researcher of Atlanta Federal Reserve Bank

Time: 2021-4-20 10:00-11:30

VOOV Meeting ID: 779 742 801


Abstract

We study how interbank wholesale funding in China influences monetary policy transmission under a dual-track interest-rate system and how it contributes to increasing systemic risks in recent years. By constructing a bank-panel dataset, we find that wholesale funding via interbank certificates of deposit not only facilitates policy interest rates to transmit into loan by non-state banks, but also leads to fast growth in their shadow banking activities as an unintended consequence. Accordingly, non-state banks with a heavier exposure to wholesale funding witness a larger increase in systemic risks in response to negative shocks to the economy since 2018. We advance a theoretical explanation of our empirical findings and quantify the trade-off of banking regulation on wholesale funding between the effectiveness of monetary policy transmission and exposure to systemic risks within this framework.


Speaker's Information

Kaiji Chen is an associate professor of economics at Emory University, a Researcher at Atlanta Federal Reserve Bank, a distinguished professor at the Institute of New Structural Economics at Peking University, and an associate editor of China Economic Review. Graduated from the University of Southern California in 2005 with a doctorate in economics. The research direction is macroeconomics. His current research interests include China's macroeconomics, monetary policy, and credit issues in the macroeconomics. The research results were published in the American Economic Review, Journal of Monetary Economics, American Economic Journal: Macroeconomics, Review of Economic Dynamics, European Economic Review, NBER Macroeconomics Annual and other top international economics journals and category A journals.