The impacts of high-frequency US uncertainty shocks on China’s investment and bank loans: evidence from mixed-frequency VAR

ABSTRACT

This paper evaluates the effects of high-frequency US uncertainty shocks on China’s investment and bank loans through the mixed-frequency vector autoregression model. We find that time-stamped US uncertainty shocks generate partly heterogeneous impacts on China’s investment and bank loans. The responses of bank loans with different maturities and private-owned enterprise investment are consistent with the theoretical results and policy operations except for the pattern of state-owned enterprise investment in the face of uncertainty shocks. By further decomposing the state-owned enterprise investment, we reveal that the injection of government investment to state-owned enterprise biases the time-varying responses of state-owned enterprise investment to US uncertainty shocks. Compared to the single-frequency approach, the mixed frequency approach produces richer economic results and insights.

KEYWORDS:

• Uncertainty Shocks
• state-owned Enterprise
• investment and bank loans
• mixed-frequency Vector Autoregression

JEL CLASSIFICATION:

• C32
• E22
• E44

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ In the Appendix, Figure A1 presents the impulse responses of uncertainty shock proxied by economic policy uncertainty and find that our benchmark results are insensitive to the alternative variables of uncertainty.

² Figure A2 in the Appendix shows that no matter real or nominal variables, our benchmark results keep consistent.

³ In the Appendix, Figures A3–A4 further demonstrate that lag order (2) and the order of variables do not affect the results substantially.