09/27:Firm Quality Dynamics and the Slippery Slope of Credit Intervention
地點：1F, Wanzhong Building, Langrun Garden, Peking University
A salient trend in crisis intervention has emerged in recent decades: Government and central banks offered funding directly to nonfinancial firms, bypassing banks and other credit intermediaries. We analyze the long-term consequences of such policies by focusing on firm quality dynamics. In a laissez-faire economy, firms with high productivity are more likely to survive crises than those with low productivity. The government funding support saves more firms but cannot be customized based on firm productivity, dampening the cleansing effect of crises. The policy distortion is self-perpetuating: A downward bias in firm quality distribution necessitates interventions of greater scale in future crises. Our mechanism is quantitatively important: we show that if policy makers ignore such distortionary effects on firm quality dynamics, the resultant credit intervention would almost double the optimal amount.
09/20:The Mandarin Model of Growth
地點：1F, Wanzhong Building, Langrun Garden, Peking University
In China's hybrid economy, the central authority uses economic performance evaluations to influence local officials' career advancements. These career incentives can spur growth when local governments are debt-constrained but may lead to short-termism, excessive leverage, and crowding out of private capital when debt constraints are lax. We develop "institutional accounting" to derive parameters characterizing the Mandarin system and perform counterfactuals to study their effects. Our findings suggest that the career incentives play a key role in delivering fast economic growth in the pre-2008 period and controlling local government debt significantly contribute to sustained economic growth in the post-2008 period. The overall welfare implications of the Mandarin system remain ambiguous.
