Izvorni znanstveni članak
https://doi.org/10.1080/1331677X.2022.2108477
Formalize the informal: market segmentation and integration in the formal and informal credit markets in Wenzhou
Zhongming Cheng
Bo Zhang
Xinhe Huang
Yuhang Chen
Sažetak
In 2012, the Chinese government designated Wenzhou city as a
testbed for policy experimentation aimed at institutionalizing informal
lending practices. This study investigates how interest rates in
the formal and informal credit markets interacted before and after
this policy experimentation. Hence, we use the vector autoregression
models and ordinary multiple regression method, which is based on
the financial repression theory. We document large yield spreads
between the formal and informal credit markets in Wenzhou before
(2003–2011) and after (2013–2018) the reforms. We find an increase
in the responsiveness of the informal sector to the formal sector,
after the reforms. We argue that the informal financial system serves
as a one-way substitute for the formal financial sector in Wenzhou.
An analysis of the transaction-level data suggests thatmaturity, availability
of collateralization, loan purpose, and the amount of loans
determine informal lending rates. Thus, this study provides important
policy implications for reforming China’s financial system
Ključne riječi
Informal finance; formal finance; yield spread; segmentation
Hrčak ID:
306647
URI
Datum izdavanja:
30.4.2023.
Posjeta: 143 *