Predicting Chinese Banking Policy incidence using a VAR model

Abstract

In this exploratory research, we examine the effect of economic and noneconomic indicators on the creation of Chinese Banking and Insurance Regulatory Commission policies using a VAR model. We find that CBIRC policies are predicted by State Council construction policies and policies set by the State Administration of Foreign Exchange. This indicates that the CBIRC is inward-looking, observing what other regulators are doing rather than responding to changes in the real and financial economy. This may be a product of market distortions due to China’s unique blend of state-oriented and market-based institutions.

Keywords:

• Banking policies
• policy prediction
• state-oriented institutions

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The data used are from a private source, the Wanfang Database.