Sili Zhou (Fudan University) - Missing Collateral Channel in China? Evidence from COVID-19

Co-authors: Jiqiao Gao (Fudan University), Xiangyu Guo (Fudan University) and Chang Ma (Fudan University

We provide a novel two-stage estimation method to identify the collateral channel in China. First, we estimate a city-level land price change using Chinese transaction-level data during COVID-19. We find that the national lockdown policy significantly reduces land market transactions for both price and volume. Importantly, the estimated land price change is only correlated with the severity of COVID but not any other factors that could affect firm-level decisions. Second, we estimate the impact of the COVID shock on corporate activity through the estimated land prices. This effect is felt differently by firms depending on their pre-COVID land holdings. Our results are thus consistent with a collateral channel in China.


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