Liquidity Regulation and Unintended Financial Transformation in China
We trace the origins of China's rapidly developing shadow banking sector to the adoption of stricter liquidity rules by Chinese regulators in the late 2000s. Our analysis exploits cross-sectional di¤erences in the bindingness of these rules along with time variation in product characteristics. We also discuss alternative hypotheses for the rise of shadow banking in China and explain why these hypotheses cannot account for the origins of the system.
Document Object Identifier (DOI): 10.3386/w21880
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