Research On The Influence Of Policy Credit On China’s Local Investment And Total Factor Productivity

Policy banks are a type of special financial institutions led by the government to achieve social and public goals.They play an important and non-substitutable role in implementing national macro-control policies,promoting economic growth,smoothing the economic cycle,adjusting economic structure,supporting small and medium-sized enterprises,and promoting social equity.Especially after the 2008 international financial crisis,the role of policy banks in promoting economic growth and stabilizing economic fluctuations has been basically recognized by the political,academic and financial circles.However,policy banks’ other effects on economic development and the financial system,especially its negative external effects,have received extensive attention and have been controversial.In order to better play the role and advantages of policy banks and promote high-quality economy development,it is of great theoretical and practical significance to conduct in-depth study of the external effects of China’s policy banks while promoting economic growth,and to have a deep understanding of their positive and negative effects on economic operation,so as to better play the role and advantages of policy banks and promote high-quality economy development has important theoretical and practical significance.The existing literature on China’s policy banks mainly focuses on theoretical analysis and policy research,and some literature uses credit data to empirically analyze their relationship with economic growth and private economic investment.Overall,there are the following deficiencies:(1)From the perspective of research content,first,the existing literature mainly discusses the role of policy banks on economic growth,and there are few research documents on their external effects,or it only considers their impact on private investment,instead of studying from a larger perspective.Second,the research on the relationship between policy banks and total factor productivity,especially the empirical analysis using actual data,is still relatively lacking.(2)From the perspective of research methods,first,the existing literature is mainly based on theoretical analysis and policy research,and there are few literature that use theoretical models for analysis.Second,limited by the availability of data,there are few articles analyzed by empirical methods.At the same time,there are problems such as relatively old data,lack of attribute information.In the context of the above research,in view of the shortcomings of the existing literature,this paper starts from the perspective of external effects,adopts two methods of theoretical model analysis and empirical analysis,based on the credit data of a large domestic policy bank,from both macro provincial and micro enterprise levels,discusses the positive and negative external effects of policy banks on local economic operation while promoting economic growth.In terms of theoretical model analysis,based on the characteristics and behaviors of policy banks,a theoretical model including representative individuals,enterprises,governments,and policy banks is constructed.This model,analyzes the influence and mechanism of policy credit on enterprise investment and government investment.In terms of empirical analysis,based on the framework of Solow’s growth model,it comprehensively analyzes the impact and mechanism of policy credit on the two core factors of local economic growth—investment and total factor productivity.This paper shows that although the theoretical model can analyze the impact of policy credit on economic variables such as corporate investment,as well as the specific impact mechanism of the crowding-in effect and the crowding-out effect.However,the interaction,size and final effect of the two can not only be analyzed through theoretical analysis.It is difficult to form qualitative results,and it depends on factors such as a country’s economic development stage,investment environment,financial system,and etc.It is necessary to use real data to conduct empirical analysis and draw final conclusions,which is an important reason of the contradictory conclusions of the existing literature.Empirical analysis finds that,in the sample data period of this paper,policy credit has a significant positive crowding-in effect on local investment,including private economic investment,and a significant negative effect on total factor productivity.There are certain structural differences in aspects such as regions,industry,and time.The specific research contents and conclusions of each chapter are as follows:The first chapter is the introduction.It briefly introduces the research background,significance,content,method and innovation of the paper,and explains some research concepts.The second chapter is the related theory and literature review.Firstly,the basic economic and financial theory related to the research of this paper is introduced.After that,it summarizes the existing relevant literature from two aspects: one is the impact of policy bank credit on economic growth,local investment,especially private investment;the other is the impact of policy bank credit on total factor productivity.Finally,it summarizes and reviews the existing research results,points out the shortcomings of the existing research,and demonstrates the research direction and significance of this paper.The third chapter is the theoretical basis and performance of policy-based credit to support local economy.Firstly,it introduces the theoretical basis of the existence of policy-based finance,including the governmental interventionism theory,the quasi-public goods theory,and the financial constraint theory,etc.;and analyzing the definition and characteristics,advantages and functions of policy banks.Furthermore,it illustrates the development of policy banks and the development of China’s policy banks.Finally,it discusses the current operating status of China’s policy banks and their support to local economy via real data.The fourth chapter is the theoretical model analysis for the impact of policy bank on enterprise investment.It builds a theoretical model,formulating the basic hypothesis,recording the behavior of economic subjects including policy banks,and solving the model.It analyzes the influence and mechanism of policy bank on corporate investment,government bonds and government investment through the model;Meanwhile,it inquiries into the impact of policy bank on total factor productivity qualitatively.The fifth chapter is an empirical analysis for the impact of policy-based credit on provincial investment.Firstly,it analyzes the positive and negative external effects of policy-based credit on local investment from the perspective of theory and mechanism,and proposes several research hypotheses.Afterwards,it analyzes the influence of policy-based credit on total provincial investment,state-owned economic investment,private economic investment,central project investment and local project investment,and conducting instrumental variable test,robustness test and heterogeneity test from macro provincial level.Finally,it analyzes the impact of policy-based credit on the enterprises operation from the micro provincial-enterprise level,using the data from two types of micro-enterprises,industrial enterprises and listed companies.The result suggests that policy-based credit has both positive and negative external effects on local investment.In terms of positive external effect,firstly,policy-based credit has a significant impact in promoting the total investment amount in fixed assets,state-owned economic investment,private economic investment,and local project investment in all provinces.Secondly,policy-based credit has a significant impact in promoting investment in economic backward regions,but has a weaker impact on developed regions.Thirdly,policy-based credit has a significant impact in promoting key infrastructure sectors or their strongly related upstream and downstream industries.Fourth,under the large-scale stimulus policies responding to the economic downturn,policy-based credit can significantly increase investment levels and stimulate economic growth,further,to correct economic cycle fluctuations.Fifth,policy-based credit will have a significant impact in promoting well-manage and powerful large-scale enterprises.In terms of negative external effect,policy-based credit has no significant impact on industries with weak financial support.Second,it has a significant negative crowding-out effect on industries which are in a downward cycle,such as mining and manufacturing.Third,it has a significant negative impact on the financial industry.The sixth chapter is an empirical analysis of the impact of policy-based credit on provincial total factor productivity.Firstly,the influence of policy-based credit on total factor productivity is analyzed from the perspective of theory and mechanism,and proposes several research hypotheses.After that,it analyzes the impact of policy-based credit on the growth rate of provincial total factor productivity from the macro provincial level,and conducts instrumental variable test,robustness test,mechanism test and heterogeneity test.Finally,using the data of industrial enterprises and listed companies,it analyzes the impact of policy-based credit on enterprise productivity from the provincial micro-enterprise level.The results indicate that policy-based credit has a negative impact on provincial total factor productivity.Specifically,first,policy-based credit has a significant negative impact on provincial total factor productivity,scale efficiency and technical efficiency of decomposition indicators.Second,the effect of policy-based credit was not significant on total factor productivity before 2008,but after the 4-trillion stimulus policy in 2008,policy-based credit had a significant negative impact on total factor productivity.Third,in regions with relatively backward economies,policy-based credit has a significant negative impact on total factor productivity;in economically developed regions,it has a certain positive impact on total factor productivity.Fourth,policy-based credit has a significant negative impact on the total productivity of non-essential supported industries or enterprises,such as manufacturing enterprises.However,there is no significant negative impact on listed companies with advantages in obtaining credit resources.The seventh chapter is the conclusion,policy recommendations and prospect.Firstly,it summarizes the primary content and conclusions of this paper,and then proposes the policy suggestions and countermeasures.Compared with the existing research literature,the innovations of this paper mainly include the following aspects: First,in terms of research perspective,starting from the perspective of external effects,analyzing the respective relationships between policy banks and economic operation,core factors of economic growth,in a more comprehensive and systematic study;contributing a macro,comprehensive and profound understanding of the characteristics,behavior and influence of policy banks,and forms a useful supplement to existing research.Second,in terms of theoretical models,constructs a theoretical model including policy banks,and proposes a theoretical framework for analyzing the impact of policy banks on other macroeconomic variables,providing theoretical guidance for empirical analysis of the external effects of policy banks.This may make up for the deficiencies or gaps of existing research to some extent.Thirdly,in terms of empirical analysis,using internal data,it analyzes the impact of policy credit on local investment in more detail,including different categories,different regions,different industries,etc.,and analyzes the impact on total factor productivity on the basis.According to the characteristics of policy-based credit,provides a simple,effective and feasible instrumental variable,which can better solve the endogenous problem of the model.The data used in this study is more abundant and the empirical analysis is more comprehensive and detailed,which provides a useful supplement or evidence to the existing research,especially to make up for the lack of empirical analysis of the relationship between policy-based credit and total factor productivity.