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Banking on ownership: Financing premium, credit misallocation, and SOE–POE heterogeneity in China
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DOI：10.1016/j.econmod.2026.107730.png)
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Abstract
En 中文
• There is significant credit misallocation in China, which stems from the difference in financing constraints and financing costs between SOEs and POEs. The NK-DSGE model with firm heterogeneity quantifies the asymmetric effects of credit misallocation. • From a dynamic perspective, the decline in credit misallocation would benefit POE as well as the macroeconomy. From a static perspective, the transfer of credit resources from SOEs to POEs can contribute to overall output and investment in steady-state. • Price-based structural monetary policy is effective in mitigating credit misallocation and improving POE operating performance. • The implementation of the Budget Law of China in 2015 significantly improves POE operating performance by reducing their financing cost, which validates the model findings.
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