Based on the more recently developed technique of out-of-sample tests for Granger causality (McCracken, 2007), this paper investigates systematically the exported and imported characteristics of Chinese inflation. We also employ the technique of rolling impulse response analysis (Yang et al., 2006a) to investigate the role of China in international transmission of price and external imported feature of China’s inflation under different exchange rate regimes. We show that inflation in China exhibits external imported feature and China’s new exchange rate regime introduced in 2005 do not insulate the domestic price levels from foreign inflation shocks. Finally, we put forward to some advice to keep the price stability.

The international practice proves that financial systemic risks not only damaged financial stability but also imposed great losses to economy and social wealth. The international financial crisis happened in 2008 has been attacking the global financial market and real economy permanently, under the background of external risks spill-over effects and prominent characteristics of transition economy of China itself, cyclical and structural problems overlaps, China’s real economy and financial system face worse risks which are emerging gradually. How to set up an approach to monitor and calibrate financial systemic risks so as to identify and prevent risks is a very important and imminent task. The essay tries to learn from international and domestic latest studies and practical achievements, and makes a deep research on the area which has not been explored thoroughly. It categorizes the systemic financial risk into external and internal factors by analyzing the causes, transmission and propagation mechanism of systemic financial risks. It figures out the transmission mechanism as internal and cross-border transmission, and categorizes propagation mechanism into credit crunch, liquidity crunch and asset price fluctuation mechanism. Based the comparison of different alarm and monitoring methodologies, and the analysis of the features of Chinese systemic financial risk, it recommends that China should adopt the synthetic index method to build the systemic financial risk monitoring and calibrating system. The synthetic index model was build based on the historical data of the Chinese market, adopting the Markov switching model which is not only able to assess the entire risk, but also able to dig into detail in specific areas, thus being able to bridge macro-prudential and micro-prudential lenses. The synthetic index model also adds an index correction mechanism to better fit into the very dynamic Chinese financial market.

Based on panel data from 91 countries over the year of 1983 to 2012, this paper analyzes the effects of financial deleveraging and financial leverage volatility on economic growth and financial stability by using system GMM estimation. The empirical analysis yields the following results: (1) there is a robust negative relationship between financial deleveraging and economic growth and the deleveraging process is generally associated with higher probability of financial crisis; (2) the volatility of financial leverage has a negative impact on both economic growth and financial stability. These conclusions have explicit policy implications for economic growth and financial stability. First, to prevent the excessive leverage of the financial system, preemptive measures should be taken to strengthen the macroeconomic management of financial leverage. Second, in the passive deleveraging process of the post-crisis period, to escape economic recession and financial instability caused by fast financial deleveraging, the policy authority should adopt progressive strategies and fully consider the smoothing operation of policy implementation.

This paper studies the direct and indirect effects of monetary policy, house prices fluctuation on consumption. Then, two specific impact paths of monetary policy and house prices on consumption are identified. Research shows that there is a direct path of China’s monetary policy’s influence on consumption,and there is also indirect influence path of house prices on consumption through monetary policy. Moreover, the influences of these two paths on consumption are nonlinear and time-varying characteristics. However, the direct effect of house prices on consumption does not exist, and the indirect effect of monetary policy affect the consumer by housing prices does not exist. Therefore, in the short term, the Central Bank can adopt structural monetary policy to enhance consumer demand. But in the long term, regulation of house prices are needed to expand consumption.

This paper proposes to decompose the monetary policy into expected and unexpected components using the spreads of fixed and floating rate bonds, and furthermore, we analyze the dynamic and asymmetric effects of unexpected monetary policies on the credit spreads of corporate bonds. Our empirical results show that: firstly, the effect of unexpected monetary policy on the credit spreads is more significant than that of expected components; secondly, the effect of monetary policy on the credit spreads of corporate bonds is stronger in economic booms than that in economic recessions; last, the effect of monetary policy on the mid-term and long term corporate bonds is more significant, whereas the short term effect is not significant.

This paper explores how to implement global value chains upgrading of China's manufacturing industry from the perspective of financial constraints. By using 2001-2011 data of bilateral trade data and non-competitive input-output tables, we measure the industries’ participation and position in global value chain respectively. Then, we estimates the effects of financial constraint on participation degree and position of China's manufacturing industry in global value chain, both from static and dynamic perspective. The study finds that financial constraints is the key factor to determine China's industrial embedded in global value chain. Relatively low level of financial constraints can promote the industries’ upgrading in global value chain, while relatively high level of financial development lead the industries shifted to the low end of GVC. In addition, the level of financial development of export partner hinders our industry's upgrading in GVC. The implementation of “regional diversity” of export strategy will be more conducive to the transformation and upgrading of China’s manufacturing industry.

Real estate property price has surged dramatically in school districts with high-quality primary schools in major Chinese cities, while rents do not see much increase. This is due to the policy that in most cases only owners have the privilege to access local public schools in China. In this paper, we use the discounts of rent yields as a measurement willingness-to-pay to high-quality primary public school using micro data in Shanghai. We find that the rent-to-sale ratio is about 5 percent lower on average in the neighborhoods in good-school districts, compared to those in ordinary school districts. The gap can be as large as 19 percent in apartments with smaller square footage and is sensitive to changes of policies regarding public school enrollment. We suggest that if the quality of primary schools cannot be fully equalized in the near future, allowing tenants to enjoy the same privilege as owners can not only significantly cut the rent-to-sale ratio discount of the good-school-district apartments, but also improve intergenerational mobility in education attainment, and improve the efficiency of capital uses.

This paper estimates bank efficiency using a stochastic frontier model accommodating non-monotonicity and heteroscedasticity of inefficiency, and investigates the relationship between bank risk and efficiency from the perspective of monetary policy in a sample of Chinese commercial banks from 1994 to 2013. If bank output is measured by total loan without deducting non-performing loan, cost efficiency will be systematically overestimated while profit efficiency will be underestimated. If ignoring capital investment, both cost and profit efficiencies will be overestimated. Annual moves of cost efficiency and profit efficiency are similar and consistent with Chinese banking revolutions and business cycles. Chinese commercial banks have risk channels, and that continuous and pro-cyclical. Monetary policy not only affects bank risk and efficiency directly, but also indirectly influences bank efficiency through risk channels. The effect of bank risk on bank efficiency is non-monotonic and shows an invested U-shape, which results in the existence of the optimal risk with respect to bank efficiency improvement. Profit efficiency rises in response to the increase in bank risk and higher profit efficiency leads to greater risk.

This study examines the impact of geographic diversification on bank performance using a unique dataset from China. We exploit the bank deregulation of geographical branching restriction as an exogenous policy shock and use multiple performance measures. Our results suggest both bright and dark sides of geographic diversification with regard to bank performance.

Based on the successful experiences of microfinance institutions (MFIs) in many developing countries, China started micro-credit companies (MCCs) pilot reform since 2005. The reform allows private capital to establish MCCs in rural areas to create a formal vehicle for small and micro businesses in rural areas and adopts “central-local” dual-regulation framework for the first time which can be regarded as a quasi-experiment. Under duel-regulation framework, some provincial governments break the financial leverage restriction on MCCs, although the leverage ratio set by central government is limited to 0.5. Using a nationwide dataset of 457 MCCs, we examine how the financial leverage restriction affects the trade-off between sustainability and outreach. Controlling for the possible non-random assignment of restriction via treatment effects and instrumental variables regressions, we find evidence that there is no trade-off between sustainability and outreach to small-scale borrowers and rural clients for MCCs who break the leverage restriction. However, MCCs with financial leverage less than 0.5 instead tend to reduce both profitability and outreach and are shown to be riskier with a higher loan concentration.

In this paper, the Malmquist index analysis of the three-stage DEA model is innovatively utilized to make an empirical analysis on the reform performance of 115 sampled county rural credit cooperatives nationwide from 2007 to 2012 by introducing the expected output indicators and eliminating the influence of external environment factors. The research shows that the overall performance, the commercial performance, and the agricultural service performance of rural credit cooperatives were generally improved. Moreover, commercial performance enjoys highest improvement, while agricultural service performance was improved least. Additionally, the reform performance of the rural commercial bank is higher than that of rural credit cooperatives. Nevertheless, 20-30% of the total sample suffered from worse reform performance, and such effect were more significant for the sample of agricultural service performance as well as rural credit cooperatives. Accordingly, in this paper, the policy suggestions about improving the reform performance of rural credit cooperatives are as follows: the first is to strengthen policy support for agriculture financial services; the second is to boost modern financial technology application level; the third is to further improve the sustainable development mechanism.

Based on the background of margin trading and short selling initiation in China, this paper devotes to test the effect of the new trading mechanism on insider trading activities. The results show that the probability of insider trading turns out to be higher after firms’ initiation of margin trading and short selling, especially among smaller firms or firms with higher institutional ownership. However, good legal environment could restrict such activities. The stimulation effect of margin trading and short selling on insider trading is attenuated for firms located in districts where the level of ruling by law is relatively higher. These results imply that margin trading and short selling stimulates insiders’ arbitrage trading while effective government based on the rule of law has significantly deterrent effect on these trading behaviors.

This paper directly investigates the impact of media coverage on corporate governance as well as the mechanism, from the perspective of corporate fraud frequency, and also analyzes the different governance roles of media coverage on firms with different fraud frequency. The empirical results show that the media coverage does mitigate the frequency of corporate fraud, especially for the firms with more frequent frauds. This paper further discovers that the governance role of media coverage increased year by year. Finally, we find an evidence supporting the argument that the positive role of media coverage in corporate governance mainly works through the government involvement mechanism rather than the reputation mechanism.