Volume 12, Issue 2

To settle the theoretical and practical disputes over monetary policy cross-cycle adjustment, this paper explores the possible effects of China’s monetary policy cross-cycle adjustment based on empirical data. By using China’s macroeconomic data between the first quarter of 2000 and the fourth quarter of 2021, we use the HP filtering method to measure the trend of economic cyclical volatility, the three-stage SETAR model and the trend mutation point identification method to identify two types of cycles, respectively, and the FAVAR model to make empirical judgments on the effectiveness of monetary policy cross-cycle adjustment. We have the following research findings. First, monetary policy has certain cross-cycle adjustment effects on aggregate output, but has quite strong state dependence. Second, monetary policy has no cross-cycle adjustment effects on industrial output. Third, the higher the economic uncertainties, the worse the monetary policy cross-cycle adjustment effects, which, however, can be increased by intensifying monetary policy regulation. Fourth, in the economic recession stage, quantity-based monetary policy has advantage over price-based monetary policy in cross-cycle adjustments, while both of the above policies have no cross-cycle adjustment in the economic growth stage. Fifth, policy expectation plays an important role in cross-cycle adjustment, and reinforcing expectations is the key to realizing cross-cycle adjustment.

Increasing the efficiency of resource allocation is the basis and guarantee for boosting high-quality economic development. Based on the panel data of Chinese industrial enterprises and cities from 2008 to 2013, this paper studies the influence of infrastructure construction demand shocks represented by local government debt expansion on the efficiency of sectoral resource allocation from the perspective of sectoral linkage. According to the empirical findings, local government debt significantly reduces the resource allocation efficiency of manufacturing sector that is highly related to infrastructure construction. This conclusion is still tenable after the robustness test using the simulated local government debt as an instrumental variable. Further mechanism tests show that there are two reasons for the decline of the efficiency of resource allocation in manufacturing sector that is highly related to infrastructure construction. First, more product demands and investments brought by the expansion of local government debt flow to less productive enterprises in the sector. Second, resource misallocation reduces the probability of high-productivity enterprises entering the market and low-productivity enterprises exiting the market, and the effect is more prominent in cities with high dependence on state-owned enterprises and high pressure on officials to be promoted. According to this study, the performance management of local government debt should be further strengthened, and particular attention should be paid to the influence of local government debt on enterprise investment and financing crowding out and resource misallocation.

This paper regards the uncredited value-added tax (VAT) refund policy promulgated in 2018 as an exogenous shock to improve the neutrality for VAT. Based on the statistics of listed companies in the non-financial sectors from 2013 to 2020, this paper applies the difference-in-differences (DID) approach to study the impact of the uncredited VAT refund policy on corporate cash holdings. The study finds that the policy has eased the impact of non-tax-neutral impact of non-refundable tax credits and lowered the level of corporate cash holdings. Furthermore, the analysis of capital sources verified that the policy has optimized the corporate capital conditions. These findings have proved to be robust after a series of tests. At the level of cross-sectional differences, the uncredited VAT refund policy exerts both “resource effect” and “signal effect”, enabling companies to reduce cash holdings in the dimensions of both tax endowment and market expectation. At the level of policy effects, the policy improved the corporate behavior of high cash holdings for the production and operation cycle, with more notable impact on enterprises with higher tax credit rating. At the level of economic consequences, the adjustment of corporate cash holdings induced by uncredited VAT refund policy has significantly improved operating performance and reduced performance volatility, with a greater impact on enterprises with high capital intensity. The research findings evaluate the uncredited VAT refund policy from the perspective of tax neutrality, laying a theoretical foundation for further optimizing the uncredited VAT refund policy and the modern fiscal, tax and financial systems.

The Environmental Protection Tax Law that took effect in 2018 gave local authorities a certain amount of discretionary power to set the local rates for environmental protection tax. The inter-provincial gradient tax rates pattern may induce strategic relocation of enterprises, leading to unintended policy results. Combined with the data on trans-regional investment of listed companies, this paper employs the Difference-in-Difference (DID) approach to study the impact of inter-provincially different environmental tax rates on the trans-regional migration of polluting enterprises. The study shows that due to the regional differences in the tax rates, the polluting enterprises opt for the relocation strategy of “avoiding high tax rates and opting for low rates”, setting up more subsidiaries in regions with relatively low tax rates. Further research demonstrates that the trans-regional migration induced by different tax rates can help reduce production costs and increase corporate profits, while dampening the corporate enthusiasm for green innovation in the short term and resulting in pollution transfer. This paper reveals the unintended policy effects that may derive from the environmental tax reform, providing concrete proof for the comprehensive evaluation and understanding of the actual policy effects of existing environmental tax reform.

Based on a survey of migrants in 12 cities across four major urbanizing areas in China, this paper empirically studies the impact of the size of individual social networks on the migrants’ wages. After controlling for potential endogeneity using an instrumental variable approach, our empirical results from 2SLS estimation provides no evidence for significant average causal effect of network size on wage. A further exploration of quantile regression analysis with endogeneity issue managed by using the control function approach shows that a significant positive network size effect can only be found in the low-income end.

To realize the transition from high-speed growth to high-quality development, it is necessary not only to change the way and path of economic growth, but also to speed up the improvement of the institutional system that is compatible with high-quality development. China has unique institutional advantages in promoting the high-quality development of the service industry (HQDSI), but the service industry is a typical institution-intensive industry that faces higher institutional barriers than the manufacturing industry. Therefore, institutional reform and business environment optimization are particularly important to the promotion of HQDSI, and the effect is also very prominent. Facing the future, we should lead HQDSI by building a high-standard socialist market economy, promote the high-quality and efficient development of the service industry by standardizing it, and encourage the innovation and entrepreneurship of the industry by improving the institutional environment, thus steadily boosting HQDSI in the new era of reform and opening up.