Marketization, Bank Lending and Growth in China: Do institutions matter for credit effectiveness?

Jenny Eather (2012). Marketization, Bank Lending and Growth in China: Do institutions matter for credit effectiveness? Master's Thesis, School of Economics, The University of Queensland.

       
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Author Jenny Eather
Thesis Title Marketization, Bank Lending and Growth in China: Do institutions matter for credit effectiveness?
School, Centre or Institute School of Economics
Institution The University of Queensland
Publication date 2012-11-05
Thesis type Master's Thesis
Supervisor James Laurenceson
Total pages 89
Language eng
Subjects 14 Economics
Formatted abstract

In this thesis the question of whether the broader institutional framework affects the impact of bank credit on per capita GDP growth in China is examined, using provincial level data including the NERI marketization index from 1997 to 2008. China’s provinces vary markedly in terms of the levels of marketization they have achieved, implying that the growth impact of a given amount of credit may vary across provinces. Using a fixed effects specification, and then controlling for simultaneity bias using a GMM dynamic panel estimator, it is found that bank credit is more effective at promoting growth at lower levels of marketization. Three mechanisms are put forward to explain this result: 1) China’s financial system has a relatively high level of government intervention. At low levels of development, there is a potential justification for government intervention in addressing market failure. This justification weakens as development continues and market institutions improve. 2) The more marketized provinces likely rely less on credit from the formal banking system for growth, raising much of their investment funds through retained earnings. In provinces with low levels of marketization, credit from the official banking sector is a more binding constraint. 3) Consumer credit may be expanding more quickly in the more marketized provinces, leading to a lower proportion of credit being channeled into productive investment.

Keyword China, financial system, marketization, bank credit

Document type: Thesis
Collection: UQ Theses (non-RHD) - UQ staff and students only
 
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Created: Sat, 16 Feb 2013, 13:28:58 EST by Ning Jing on behalf of Scholarly Communication and Digitisation Service