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RETRACTED ARTICLE: International market risk, monetary policy stance, and corporate financing: China’s economic recovery in the post-pandemic era

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This article was retracted on 08 April 2024

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Abstract

In the post-pandemic era, the epidemic in China has been effectively controlled and the economy has entered the recovery stage. However, the situation abroad is still complex, which affects the world economy, and the international market is facing great uncertainty. Discussing whether and how an international market risk affects domestic economic recovery is of great significance. We construct an open DSGE model, including market risk shocks and corporate financing constraints. The increase in international market risk is adverse to domestic credit financing and affects enterprise credit demand and bank credit supply. An ultra-loose monetary policy amplifies the negative impact of an international market shock on credit. Using data on listed nonfinancial companies from the first quarter of 2007 to the second quarter of 2019 in China, we confirm the findings in the theoretical part. Finally, this study puts forward some suggestions to prevent international market risk and recover domestic economic vitality smoothly in the post-pandemic era.

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Notes

  1. Data source: Phoenix News.

  2. Source: Bureau of Labor Statistics. The US unemployment rates for April, May, June, and July 2020 were 14.4%, 13.0%, 11.2%, and 10.5%, respectively, with the highest rate during the 2008 financial crisis at 10.4% in February 2010.

  3. The US federal fiscal deficit for April, May, and June 2020 was $738.02 billion, $398.75 billion, and $864.07 billion, respectively. Data source: Bureau of the Fiscal Service.

  4. Data source: People’s Bank of China.

  5. The concept of all interest rates in the theoretical part of this paper is the concept of gross return, which is equal to the ratio of principal and interest to principal.

  6. The nonperformance loan ratio (hereinafter called the NPL ratio) data of Chinese commercial banks started in 2003. The NPL rate of Chinese commercial banks from 2003 to 2007 exceeded 10% due to the fact that the criteria for the five classification levels were not exactly the same for each Chinese bank before 2007, after which the CBRC issued the “Guidelines on Loan Risk Classification” to refine the classification methodology. Although the NPL ratio of the banking industry kept decreasing from 2003 to 2009: from 17.9% in the fourth quarter of 2003 to 1.58% in the fourth quarter of 2009, the change in loan ratio was too large. From 2010 onwards, the NPL ratio of Chinese commercial banks stabilized at 1.1%–1.5% level. Therefore, the average value of 1.363% of the NPL rate from Q1 2010 to Q4 2018 is used here to estimate the default rate in China.

  7. The magnitude of the autoregressive coefficient only affects the duration of the shock and does not affect the direction of the shock effect. Therefore, it does not affect the conclusion of the theoretical part of the paper.

  8. This \( \phi^{Y} { = }0.25{ 0}{\text{.5}}{ 0}{\text{.75}}\) corresponds to the over-tightening, baseline, and over-loosening cases of monetary policies in the Fig. 1, respectively.

  9. Source: CSMAR database. CICSI is a monthly measure of investor sentiment in the Chinese stock market obtained using six data: fund discount rate, monthly trading volume, number of IPOs, IPO first-day return, number of new investor accounts, and consumer confidence index, weighted by a certain ratio.

  10. Z-score = 1.2 × working capital / total assets + 1.4 × retained earnings / total assets + 3.3 × profit before interest and tax / total assets + 0.6 × total market value of stocks / book value of liabilities + 0.999 × sales revenue/total assets.

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Funding

This study was funded by the 2022 key research topic of Anhui Financial Society: “Research on the Impact of Financial Literacy on the Financial Vulnerability of Urban and Rural Households”; Humanities and Social Science Project of Education Department of Anhui Province of China (SK2021A0276); Scientific Research Project of Guangdong University of Foreign Studies (21QN22); Guangdong Society Project Planning (GD22YYJ02).

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Authors and Affiliations

  1. School of Finance, Anhui University of Finance and Economics, Bengbu, 233030, Anhui, China

    Cheng-Ben Wang

  2. School of Finance, Guangdong University of Foreign Studies, Guangzhou, 510000, Guangdong, China

    Qian Zhong

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  1. Cheng-Ben Wang
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  2. Qian Zhong
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Correspondence to Qian Zhong.

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This article has been retracted. Please see the retraction notice for more detail: https://doi.org/10.1007/s10878-024-01145-7

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Wang, CB., Zhong, Q. RETRACTED ARTICLE: International market risk, monetary policy stance, and corporate financing: China’s economic recovery in the post-pandemic era. J Comb Optim 46, 7 (2023). https://doi.org/10.1007/s10878-023-01072-z

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