CAUSALITY BETWEEN PEER-TO-PEER LENDING AND BANK LENDING IN CHINA: EVIDENCE FROM A PANEL DATA APPROACH

This study applied a multivariate panel Granger causality test to examine the causal relationship between peer-to-peer lending (P2PL) and bank lending (BL) in China's eight major regions for the period from 2014M01 to 2019M12. The empirical results of this paper support evidence for the P2PL leading hypothesis in regions such as Jiangsu and Hubei while the BL leading hypothesis relationship supports the evidence for regions such as Zhejiang and Shanghai. In addition, there is an interactive causal relationship between P2PL and BL in a region such as Shandong. However, the result of a neutrality hypothesis supports three of these eight major regions (Guangdong, Beijing and Sichuan). The findings of this paper provide important policy implications for China's eight major regions as well as business sectors in the banking industry for understanding and predicting market conditions.