Comment on “Collateral-Based Monetary Policy: Evidence from China”

Abstract

This discussion evaluates Fang, Wang, and Wu's study on collateral-based monetary policy in China, which exploits the 2018 expansion of eligible collateral under the Medium-Term Lending Facility. The paper develops a theoretical model-linking collateral eligibility to bond pricing, employs a novel triple-difference strategy using dual-listed bonds, and finds that policy reduces bond spreads in both secondary and primary markets. The discussion highlights the paper's methodological contributions, situates its findings within China's structural monetary policy framework, and raises future research questions on credit allocation, systemic risks, and the effectiveness of structural versus conventional monetary tools.