Monetary Expansion,financial Friction And Enterprise Efficiency From The Perspective Of Credit Discrimination

Financing difficulties of enterprises and inefficient credit rationing have always been serious problems perplexing emerging economies.China’s special national conditions-the dual economy of state-owned enterprises and private enterprises-have added new problems to the problem of credit rationing.From the perspective of credit discrimination and mortgage loan,this paper explores the influencing factors of credit rationing efficiency and the impact of credit rationing on enterprise productivity.This paper holds that banks,as an important intermediary of credit rationing,are mainly affected by two aspects: on the one hand,government implicit guarantee distorts banks’ judgment on the loan risk of state-owned enterprises,which leads to credit discrimination;On the other hand,the collateral requirements in loans reduce the motivation of banks to investigate the fundamentals of enterprises,thus increasing the information friction between banks and enterprises.Both of these effects reduce the efficiency of credit rationing.Under the background of the "four trillion loan crisis" in China,this paper studies the impact of the "four trillion loan rationing mechanism" on China’s economy.This paper is divided into six chapters.The first chapter is the introduction,which discusses in detail the content of the "four trillion" policy and its impact on China’s credit structure during the economic crisis.Specifically,the implementation of the "four trillion" policy not only enables inefficient state-owned enterprises to obtain more loans,but also allows local governments to more actively intervene in China’s credit structure.The second chapter is literature review,which critically summarizes the views and basic logic of the literature on loose monetary policy.The third chapter is the empirical analysis of monetary discrimination.This chapter verifies three hypotheses with enterprise level data: first,monetary expansion leads to the expansion of state-owned enterprises;Second,monetary expansion leads to the decline of enterprise efficiency,and the decline of state-owned enterprise efficiency is more serious;Third,the more serious the credit discrimination,the greater the harm of monetary expansion to economic efficiency.The main impact mechanism is that the monetary expansion under government guarantee prevents inefficient enterprises from exiting the market,resulting in the decline of average total factor productivity after the crisis.The results obtained by using enterprise level data in this chapter are basically consistent with Cong et al.(2019).The fourth chapter establishes a theoretical model to study how monetary expansion affects enterprise exit and economic structure under credit discrimination.Through theoretical channels,it shows that the "four trillion" policy in 2008 distorts the entry and exit decision-making of enterprises,thus affecting the total factor productivity.On this basis,this chapter divides the consequences of monetary expansion into structural changes and scale changes,and further reveals the long-term potential impact of monetary expansion under credit discrimination.The fifth chapter establishes the second theoretical model to study the collateral requirements of loans,which may also distort the bank’s judgment of risk and reduce the incentive for banks to collect basic information of enterprises,resulting in greater information friction between banks and enterprises and lower credit rationing efficiency.At the same time,under the same information friction,higher collateral requirements distort credit supply and demand,resulting in improper credit allocation,making too much credit flow to inefficient(and abundant collateral)enterprises.The sixth chapter is the conclusion of this paper.Specifically,this paper believes that the inefficient distribution of credit resources directly leads to the imbalance of the exit proportion of state-owned private enterprises,and the lack of elimination mechanism of inefficient enterprises,which is an important reason for the decline of China’s economic efficiency after the 2008 crisis.Economies hit by the crisis usually need painful but necessary structural reform.Credit rationing should comply with this Law of economic operation and force those enterprises with fundamental defects and insolvency to withdraw.The resulting enterprise bankruptcy releases the factors of production,namely capital and labor,from poorly managed enterprises,enabling high productivity enterprises to acquire and expand at a lower cost.With the withdrawal of low productivity enterprises and the expansion of high productivity enterprises,the average productivity of enterprises will increase,so that the troubled economy will get out of the crisis and the economic structure will tend to be healthy.However,monetary easing and fiscal aid implemented by the government in crisis may interrupt this process,delay the exit of low productivity enterprises,and limit the expansion of high productivity enterprises.The government guarantee takes the government revenue as the mortgage of the debts of state-owned enterprises,resulting in credit discrimination against private enterprises.Monetary expansion will intensify the expansion of state-owned enterprises and inefficient investment.Based on the model of Melitz(2003),this paper establishes a dynamic stochastic general equilibrium model(DSGE)of two departments(SOE and POE)by introducing heterogeneous enterprises,and analyzes the effect of China’s crisis relief plan in 2008.This paper proposes two mechanisms for the loss of efficiency caused by the "four trillion" stimulus plan: first,during the crisis,those companies with good fundamentals have only temporary liquidity problems and are ideal targets to be acquired in the market.Its competitors often use the crisis to merge and acquire them,so as to achieve the purpose of low-cost expansion.Compared with government assistance,market mergers often have information advantages: competitors,rather than the government,often understand the fundamentals of the enterprise best.In other words,compared with the government,competitors have an information advantage in evaluating which companies are worth rescuing or acquiring.Therefore,those enterprises abandoned by the market and waiting for government assistance are often seriously insolvent and should withdraw from the market.Helping these enterprises finance and preventing them from exiting the market may hinder the structural reforms needed by the economy and distort the reallocation of resources.Second,during the crisis,the resources brought by expansionary policies are usually not evenly distributed to all enterprises.Due to the lack of investment opportunities,private enterprises are often reluctant to expand in a crisis.In China’s unique context,state-owned enterprises with low productivity often become the main body of monetary and fiscal expansion.Under the direct administrative order of the government and the implicit guarantee for the debts of stateowned enterprises,state-owned enterprises have to expand.Therefore,after the crisis,the share of state-owned enterprises in China’s economy has expanded,further reducing the average productivity of enterprises.At the same time,collateral will have similar consequences,making credit excessively inclined to the enterprises with collateral.In the quantitative research of the model,this paper divides the harm of monetary expansion and credit discrimination to enterprise efficiency.The results show that compared with the benchmark without monetary easing and government guarantee,the rescue plan reduces social welfare by 2.36% and average total factor productivity by 1.06%.In addition,government guarantees for loans to state-owned enterprises seem to be an important source of distortion.The further result estimated by the model is that the efficiency loss caused by monetary expansion is 0.19%,while the efficiency loss caused by credit discrimination is 0.67%.It is worth noting that under credit discrimination,the loss caused by monetary expansion is 0.39%,which means that credit discrimination intensifies the efficiency loss caused by monetary expansion.At the same time,this paper focuses on the exit mechanism of enterprises.Monetary expansion alone will save 0.3% of inefficient state-owned enterprises and 2.5% of inefficient private enterprises,while credit discrimination will cause 14.5% of inefficient state-owned enterprises to survive and 6.5% of private enterprises to exit.From the perspective of enterprise change,it can be seen that credit discrimination is not only the core cause of the average efficiency loss of enterprises,but also the main cause of the deterioration of China’s economic structure,and amplifies the efficiency loss caused by monetary expansion.In terms of the impact of mortgage loans on economic friction,this paper establishes a dynamic stochastic general equilibrium model,which combines bank decision-making with the incomplete information of enterprise productivity distribution,and internalizes the information friction.According to the estimation of this paper,after the "four trillion",the increase of mortgage loans leads to the reduction of 0.27% welfare increase and 0.16% total factor productivity increase when the economy experiences heterogeneous technological progress.