The non-equilibrium of different economic entities under the impact of the monetary policy is the key to the transmission mechanism and effect of the monetary policy. Considering the large number of China’s labor force and its heterogeneity in the transitional period, the development of traditional industries has important strategic significance. It is generally believed that traditional industries will face more severe financing constraints in the context of the tightening monetary policy. However, this paper takes the textile industry as an example of theoretical and empirical analysis, and shows that the impact of the monetary policy on traditional industries includes two opposite aspects: industrial structure hierarchy effect and demand elasticity effect. The former will strengthen the financing constraints of traditional industries because of the relatively low industrial hierarchy of traditional industries, while the latter will relax the financing constraints because of the stability of demand. The specific results depend on the combination of the two effects. The empirical results show that the hierarchical effect of the industrial structure plays a more important role, so the tightening monetary policy strengthens the financing constraints of the textile industry, and this conclusion is robust both to expansionary and tightening monetary policies. The policy implications of the study are as follows: monetary policy-making should pay attention to both aggregate and structure; the monetary policy should consider the market correction of traditional industries; the perfection of market-oriented transmission of the monetary policy should depend on the promotion of the overall market-oriented reform of the economy.
Do Monetary Policy Shocks Have a Reinforcing Effect on Traditional Industry Financing Constraints? A Case of the Textile Industry
Journal of Finance and Economics Vol. 45, Issue 07, pp. 125 - 139 (2019) DOI:10.16538/j.cnki.jfe.2019.07.010
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Cite this article
Zhan Minghua, Luo Chengjian, Li Shuai, et al. Do Monetary Policy Shocks Have a Reinforcing Effect on Traditional Industry Financing Constraints? A Case of the Textile Industry[J]. Journal of Finance and Economics, 2019, 45(7): 125-139.