The Journal of World Economy 2022, No.11
Could Expansionary Monetary Policy Really Push Macro Leverage Up?
Guo Changlin; Gu Yanwei; Liang Xiao
Abstract：Expansionary monetary policy is generally believed to be the source of greater leverage in an economy. However, the stimulus effect of the monetary policy has been ignored from this perspective. This paper identifies monetary policy shocks based on the extraction of clear narrative information, demonstrating that expansionary monetary policy is not the primary reason for the increase in the macro leverage ratio in the sample period. The stimulus effect of expansionary monetary policy on aggregate demand turns out to be stronger than its driving effect on real debt. Through analysis of corporate data, it is found that the debt-to-revenue ratio is not only a better measure of the corporate leverage level, but it also effectively explains the puzzle of the divergence between leverage ratios at the macro and micro levels. Finally, we incorporate the firm financing problem into a simple model and derive the sufficient and necessary condition under which the expansionary monetary policy is helpful to stabilize the leverage ratio.
Key words：macro leverage ratio, monetary policy, NSRVAR model, debt-to-revenue ratio
JEL codes：C32; E52; C23
Structural Kinetic Energy and the Source of “Ongoing yet Stable” Growth in Export Trade
Tie Ying; Zhu Jiachun; Huang Jianzhong
Abstract：This paper discusses the coexistence of the “stability without progress” and “subsequent instability” of China’s exports at the micro level, interpreting and verifying the phenomenon from a theoretical and empirical perspective, and discussing the driving force and the “ongoing yet stable” structural source of exports at the macro level. Drawing on the structural estimation approach, it builds a demand learning framework and confirms at the micro level that export growth driven by demand is positively correlated with belief renewal in corporate expected demand, but it decreases with an increase in the corporate export age. At the macro level, it shows that export growth comes from “young” and “stable” exporting companies. Finally, through a counterfactual simulation, it corroborates that long-term new inbound export relationships are of crucial importance in contributing to export growth. The paper’s conclusion suggests that the “stability” and “progress” of exports have a natural logical consistency. The overriding point of the “ongoing yet stable” policy is to cultivate greater long-term survival of emerging exporting corporate entities, and therefore promoting the “stability” of new inbound export relationships proves to be an important way to achieve “progress” in exports.
Key words：stability without progress, subsequent instability, ongoing yet stable, demand learning, export growth
JEL codes：D83; F12; F41
Trade Shocks and Long-Term Industry Development: Evidence from the World War I
Li Jia’nan; Gao Yating; Liang Ruobing
Abstract：Using the international trade shocks caused by the World War I as a natural experiment, our Difference-in-Differences (DID) estimates identify the impact of trade shocks on the industry development of modern China. The results show that China’s export of unskilled-intensive products with greater factor endowment advantages has improved more since the World War I. Our findings are consistent with a series of robustness tests. The trade shocks caused by the World War I boost the industrial investments and the human capital of modern entrepreneurs in the short term, while promote the accumulation of entrepreneurial human capital and the development of contemporary China’s industry in the long term. Our findings demonstrate the key role of the World War I in understanding China’s industrialization and economic transformation in the modern period, and provide the historical implications for China in dealing with external trade shocks in the process of economic development.
Key words：World War I, exports, industry development, human capital
JEL codes：N65; N75; O14
Loan Interest Rate Liberalisation and Rural Financial Institutions’ Loans to Farmers and SMEs
Qi Hao; Wu Benjian; Ma Jiujie
Abstract：Drawing on sampling data from 1024 rural financial institutions, this paper studies the impact of China’s loan interest rate liberalisation on rural financial institutions’ loans to farmers and SMEs, exploiting the event of the 2013 loan interest rate lower bound deregulation reform. The results of the study suggest that deregulation of the lower bound of the interest rate on loans can significantly promote rural financial institutions to return to their roots and increase their financial support to farmers and SMEs. Deregulation of the lower bound of the loan interest rate intensifies credit price competition in the non-agricultural sector and narrows the marginal profit gap between bank lending to the non- agricultural and agricultural sectors. The heterogeneity analysis reveals that rural financial institutions with a higher degree of commercialisation and located in places where direct financing is more developed are likely to increase their financial support to farmers and SMEs. The deregulation of the lower bound of the interest rate on loans also has a negative impact on the returns of rural financial institutions in the short term but has no significant impact on risk. This paper provides some support for deepening the reform of interest rate liberalisation, thereby guiding financing to participate in rural revitalisation.
Key words：interest rate liberalisation, rural financial institutions, loans to farmers and SMEs, rural revitalization
JEL codes：G21; G18; Q14
The Risk Contagion Effects of Zombie Companies: Evidence from the Supply Chain Mechanism
Zhou Wenting; Feng Chen
Abstract：This work explores the impact of customer zombification risk on supplier companies. The results of the study show that when a customer becomes a zombie company, the zombification risk rate of upstream suppliers increases significantly. The reason for this mainly lies in the commercial credit-based capital chain and the inventory-based product chain. Large companies that absorb greater labour pressure and contribute to higher growth, and companies with a larger scale of mortgage loans, are also more likely to receive financial support and become zombie companies. Finally, the customer zombification risk will not only be passed on to the corresponding upstream companies but will also continue to spread along the supply chain to the higher-level supplier companies, resulting in a further spread of risk.
Key words：supply chain, zombie companies, contagion effects
JEL codes：D21; D62; G30
Why Do Inclusive Public Services Lead to Residential Sorting? Evidence from the Designated School Policy
Tang Yugang; Liu Ya’nan
Abstract：Taking the designated school policy implemented in Jinan between 2003 and 2015 as a case study, this paper examines the residential sorting and segregation effects resulting from the inclusive provision of compulsory education services (which aims to ensure educational opportunities for migrant children), employing a regression-discontinuity-difference-in-differences (RD-DID) design. The study finds that the policy results in a 3-4% discount on the prices of second-hand properties within the assigned primary school districts, with no obvious changes in rents and a significant increase in the number of second-hand properties listed for sale and rent. Analysis of census data also reveals that an increase in the number of assigned schools generates a net inflow of immigrants within the census area, while non-designated attendance zones show greater growth in the number of extracurricular training institutions. This evidence suggests that an inclusive location-based public policy increases migrant children’s chances of enrolment, on the one hand, while generating a native-flight effect, on the other hand, which leads to residential sorting into different socio-economic groups within the city and aggravates residential segregation among school attendance zones. These findings are of significant relevance for governments in the urbanization process, supporting them to improve the provision of inclusive public services and the integration of immigrants.
Key words：migrant children, compulsory education, designated schools, residential sorting
JEL codes：J61; R23; H52; R5
Environmental Disclosure Evaluation and Corporate Market Value: An Impact Study Based on Third-Party Institutions
Hu Tianyang; Shen Renjun; Tu Zhengge
Abstract：True, accurate and complete environmental information disclosure by enterprises has proved to be the key to achieving the green development of the capital market. Drawing on the quasi- natural experiment of the environmental information disclosure evaluation published by third-party institutions, this paper verifies the relationship between the intervention of third-party assessment and the market value of enterprises in highly polluting industries through an empirical study of multi-period difference-in-differences technique. The study finds that: (1) the low level of environmental information disclosure induces major shareholders and institutional investors to reduce their holdings, and the evaluation result of third-party institution leads to an average decline in the market value of the evaluated enterprises of 5.49%; (2) because state-owned enterprises and large and medium-sized enterprises were dominated by stable investors, the negative impact after the intervention of third-party evaluation was more significant; and (3) for non-state-owned large and medium-sized enterprises, the evaluation result of third-party institution leads to the improvement of subsequent environmental information disclosure level. In summary, third-party evaluation stimulates the green orientation of the capital market and is therefore an important starting point when optimising the green investment and financing mechanism.
Key words：environmental information disclosure, third-party evaluation, market value of enterprises
JEL codes：D82; G32; L88
DIP Payment Method Reform, Medical Expenditure Control and Short-Term Strategic Response of Hospitals
Ma Chao; Du Yanrong; Tang Runyu; Xu Wei; Wang Tianyu
Abstract：Reform of health insurance payment methods is essential to achieve the sustainable development of health insurance funds and thereby optimise the allocation of medical resources. The much-discussed “Diagnosis-Intervention Packet” (DIP) reform has achieved some initial results in controlling medical spending. However, the effect of DIP reform on non-target groups is understudied. Taking advantage of the natural experiment of implementing the DIP reform only in the case of local patients in G city on January 1, 2018, this study estimates the impact of the DIP reform on the medical expenses of non-target groups (patients seeking medical treatment in alternative cities)using the regression-discontinuity-difference-in-differences (RD-DID) design. Empirical results of claims data from 15 tertiary hospitals show that the DIP reform has increased the total expenditure of hospitalizations for patients from other cities by RMB 2,261.533 (an increase of approximately 9.50%), and patients’ out- of-pocket expenses have increased by RMB 984.886 (an increase of approximately 9.10%), which provides strong evidence for the short-term cost-shifting behavior of hospitals in response to DIP reform. Further analysis reveals that an increase in costs can be achieved by increasing the intensity of treatment.
Key words：payment method reform; Diagnosis-Intervention Packet (DIP); remote medical treatment; regression discontinuity-difference-in-differences (RD-DID)
JEL codes：I11;I18;P35
Impact of Technology Transfer from Public Research Institutions on Corporate Innovation
Gao Chao; Liu Canlei
Abstract：The propitious combination of basic research and applied R&D focused on triggering the innovation-driven impact of public scientific research institutions on firms and the deep integration of industry, education and research are both central themes in innovation economy research and key links in improving the quality and efficiency of China’s innovative development. This paper constructs a firm- level dataset with rich patent information and then examines the impact of technology transfer from public scientific research institutions on corporate innovation within the framework of the intellectual property system. The results of the study reveal that technology transfer by public scientific research institutions significantly improves the innovation performance of Chinese enterprises, and its positive impact is not only reflected “quantitatively” (by the number of invention patent applications) but also “qualitatively” (by the number of forward citations on invention patents). Extensive analysis and discussion is also carried out considering four relevant aspects: the binary margins (intensive and extensive) of corporate innovation, the fundamentality of corporate patents, the technology-field connection between patents transferred from public research institutions and those subsequently innovated by “treated” firms and the treatment intensity. The work presents certain policy and practical implications in the integration of industry, education and research, the commercialisation of technological factors and the trade of intellectual property rights.
Key words：public scientific research institutions, technology transfer, corporate innovation, patents, integration of industry, education and research
JEL codes：JEL code：O32