On May 8th, 2023, the Centre for Finance and Development (CFD) offered a research seminar on “Chinese Monetary Policy’” with Dr Yi Huang, Professor of Finance and Assistant Dean, at Fudan University in China.
The seminar presented the findings of Professor Huang’s recent research on the redistributive effects of expansionary monetary policy, with evidence that's based mainly on workers' wages across and within firms.
FINDINGS
Expansionary Monetary Policy along with an increase in bank lending volume can have redistributive effects in China. It has been observed that an increase in loan volume resulting from such policies can lead to a reduction in inequality. However, it is important to consider that the impact of monetary policy changes varies across different socioeconomic groupes.
When monetary policy undergoes changes, different groups within the economy tend to react differently. In the case of expansionary monetary policy, it has been found that workers with lower initial income levels tend to benefit more compared to those with higher initial income. This suggests that such policies have the potential to address income disparities and contribute to a more equitable distribution of resources.
In summary, Professor Yi Huang’s research suggests that expansionary monetary policy and the subsequent increase in bank lending can have positive redistributive effects in China, particularly benefiting workers with lower incomes. Understanding these dynamics is crucial for policymakers to assess the broader implications of monetary policy and its impact on income inequality in the country.