No. 600, Guoquan Road
School of Economics
Fudan University, Shanghai, China
Institutional Affiliation: Fudan University
NBER Working Papers and Publications
|February 2020||The Collateral Channel of Monetary Policy: Evidence from China|
with , : w26792
Collateral-based monetary policy tools have been used extensively by major central banks. Lack of proper policy counterfactuals, however, makes it difficult to empirically identify their causal effects on the financial market and the real economy. We exploit a quasi-natural experiment in China, where dual-listed bonds are traded in two mostly segmented markets: the interbank market regulated by the Central Bank, and the exchange market regulated by the securities regulator. During a policy shift in our study period, China's Central Bank included a class of previously ineligible bonds in the interbank market to become eligible collateral for financial institutions to borrow money from its Medium-Term Lending Facility (MLF). This policy shift allows us to implement a triple-difference strate...