2018 CFDS Discussion Papers

Michael Funke / Rongrong Sun / Linxu Zhu

CFDS Discussion Paper 2018/3


Household borrowing in China has increased considerably in recent years, raising concerns about the household sector’s vulnerability and implications for the stability of the financial system. We construct a number of granular debt-burden indicators at the level of individual Chinese households and calculate the share of households that are financially vulnerable using the three available waves (2011, 2013 and 2015) of China’s Household Finance Survey. Overall loan-to-value (LTV) ratios appear safe and sound at first glance, but closer scrutiny reveals that Chinese households in the lowest income quintile face high vulnerability and struggle to meet their debt commitments. Our stress tests suggest that Chinese households in higher quintiles, despite the huge increase in household indebtedness, are not particularly vulnerable to declining incomes or falling house prices.

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Enzo Dia / Lunan Jiang / Lorenzo Menna / Lin Zhang

CFDS Discussion Paper 2018/2


We document the existence of a substantial dispersion of interest margins charged by commercial banks among Chinese provinces, and we build a parsimonious dynamic stochastic general equilibrium model featuring both banking and production sectors that we calibrate at both the national and provincial level. Our model can explain a considerable share of the interest margin charged in di fferent provinces, and we find support for the hypothesis that Chinese banks adopt a similar technology  across di fferent provinces. Since in the case of Chinese provinces diff erences in wages are substantial, the adoption of a national technology implies an inefficient industrial structure for the banking industry. The adoption of a common nationwide technology generates also a stronger response of the rate on loans to productivity shocks than would be the case if banks adopted di fferent technologies in diff erent provinces, and the capability of banks to smooth regional idiosyncratic productivity shock hitting fi rms declines substantially.

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Makram El-Shagi, Steven Yamarik

CFDS Discussion Paper 2018/1


This paper presents updated estimates for state-level capital and investment for 1950 to 2015. We improve upon the procedure of Garofalo and Yamarik (2002) and Yamarik (2013) by using quantity measures to apportion the mining capital stock and a geometric pattern of depreciation to derive investment data. In an empirical application we use our data to estimate the production function and a simple growth model. We find coefficient estimates that support constant returns to scale and a 1/3 output elasticity of capital. These results are consistent with past regional and cross-country papers, supporting the plausibility of our data.

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