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Heterogeneity of Monetary Transmission Mechanism and the Matthew Effect of Liquidity Allocation in Real Economy
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TitleHeterogeneity of Monetary Transmission Mechanism and the Matthew Effect of Liquidity Allocation in Real Economy  
AuthorYang Jisheng and Xiang Jingjie  
OrganizationSchool of Economics, Huazhong University of Science and Technology; 
Key WordsLiquidity Allocation; Matthew Effect; Monetary Policy; Real economy; Virtual Economy 
AbstractA financial system is supportive or not for real economy depends on whether it can flood key areas and weak links with liquidity, which means allocative efficiency is more important than total supply. Based on quantile regression model with interactive effects, this paper measures heterogeneity of the impact of monetary policy on corporate liquidity, so as to study the allocation of liquidity among real economy from the micro perspective. Study shows that Matthew effect widely exists in the effects of traditional monetary policy tools including interest rates, reserve ratio and open market operation. To be specific, the support from releasing liquidity to disadvantaged firms does not reach half of that to advantaged firms. At the same time, virtual economy diverts liquidity in a manner that strengthens Matthew effect. The weaker the firm, the more likely it is to be negatively affected, with disadvantaged firms suffering 3 times of diversion compared to advantaged firm. Fortunately, the ongoing financial reform can alleviate the Matthew effect in monetary transmission, among which the effect of interest rate liberalization is most significant.  
Serial NumberWP1348 
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