Zehao Liu
Institution
Renmin University of China
PhD Year
2018
liuzehao@ruc.edu.cn
FTG Membership
Member
Website
https://sites.google.com/view/zehaoliu/home
Areas of Expertise
Featured Work
Government Guarantees, Credit Multiplier, and Financial Fragility
Jun 1, 2026
Government guarantees generate a multiplier effect: one dollar of tax-funded guarantees expands lending by more than one dollar. This multiplier is stronger under information-insensitive debt, as guarantees suppress costly private information production, relaxing borrowing constraints for all firms rather than merely redistributing resources. However, implicit guarantees create fragility—negative shocks to collateral quality or productivity trigger government reneging and trust collapse, causing discontinuous credit contractions. Guarantees...
