This paper examines the impact of a policy targeting firms with implicit government guarantees (IGGs). We focus on the debt management policy (DMP) proposed for state-owned enterprises in China. Our analysis shows that the DMP lowered the average yield of SOE bonds by 6.6 basis points. However,...

Competition can have opposite impacts on the inflation-output trade-off by increasing the real rigidity but lowering the nominal rigidity. We build a New Keynesian model with Kimball aggregator and Calvo staggered pricing. We use the Bayesian method to estimate our model with regional data from...

This paper studies how distortions alter decisions of firms in producing multiple products (MP). Using the Annual Survey of Industrial Firm data in China, we find (i) multi-product firms are fewer and smaller than in the U.S.; (ii) the MP probability of a firm is negatively associated with the...

Using an unexpected state-owned-enterprise bond default in 2020 and a difference-in-difference method, we identify the size of implicit government guarantee in the corporate bond market of China. We find that the local government fiscal burden is the source of the implicit government guarantee....

In 2016, the Chinese government proposed a one-time debt-equity swap (DES) program to assist firms in financial distress and to reduce the leverage ratio of non-financial firms. We use a dynamic capital structure model to study the effects of this program on firms with and without subsidy. A DES...

The government proposed an unexpected one-time debt-equity swap in China in response to the rapidly growing leverage ratio of non-financial firms after 2008. We study the effects of this policy on the firms' investment decisions and the optimal capital structure in a dynamic model. To...