CHINA'S MACROECONOMIC POLICY OPTIONS: A SECTORAL FINANCIAL BALANCES PERSPECTIVE (original) (raw)

The Chinese Macroeconomy and Financial System: A U.S. Perspective

2015

1. Introduction 2. Measuring and Accounting for the Output of a Nation: GDP 3. China and the United States and the Balance of Payments 4. Long Run Economic Growth 5. Consumption and Savings in China and the United States 6. China's Path of Investment 7. Monetary Policy and Institutions in China and the United States 8. Monetary Policy in Action 9. The Keynesian Model: Extensions to China and Beyond 10. Public Finances and Fiscal Policy in Action

China and the Global Financial Crisis

Yearbook of International Politics and Law, 2012

This paper examines the effects of the global financial crisis of 2008-09 from a Chinese standpoint. It was primarily a crisis of the developed world that eventually engulfed the entire world, and through a mixture of monetary and fiscal measures supported by a stimulus program, China has weathered its adverse effects relatively well. It is important to note, however, that before the crisis China’s economy was already nearing crossroads in the sense that its growth model based on export oriented low-cost manufacturing and investment in heavy industry and infrastructure, was giving signs of exhaustion. This paper utilizes macroeconomic analysis to elucidate the vulnerabilities of the Chinese growth model and outline China’s crisis response measures, which provided a remedy in the short term, and also, and more importantly, opened an opportunity window to address its structural shortcomings in the long term and to embark on a new and sustainable path of economic growth, which requires...

No . E 2015 / 1 China ’ s financial crisis – the role of banks and monetary policy

2015

This paper develops a model of the Chinese economy using a DSGE framework that accommodates a banking sector and money. The model is used to shed light on the period of the recent period of financial crisis. It differs from other applications in the use of indirect inference to estimate and test the fitted model. We find that the main shocks that hit China in the crisis were international and that domestic banking shocks were unimportant. Officially mandated bank lending and government spending were used to supplement monetary policy to aggressively offset shocks to demand. An analysis of the frequency of crises shows that crises occur on average about every halfcentury, with about a third accompanied by financial crises. We find that monetary policy can be used more vigorously to stabilise the economy, making direct banking controls and fiscal activism unnecessary.

China After the Crisis: The Elemental Macroeconomics

Asian Economic Journal, 2001

Although the 'country runs' of the Asian crisis stopped at the Chinese border, their effects nonetheless included a realignment of real exchange rates and a rise in the risk premium demanded of investments in China. These appear to have combined with a rise in the domestic savings rate to slow the country's economic growth and its rate of labour absorption. The government's macroeconomic policy responses were to fix parity with the US dollar, undertake a fiscal expansion and, more recently, raise the minimum wage. This paper uses an elemental comparative static model, combining graphical with numerical analysis, to examine the changes in the Chinese economy due to the crisis and the contemporaneous domestic shocks.

6. Macroeconomic Effects of China’s Financial Policies

Princeton University Press eBooks, 2020

The Chinese economy has undergone three major phases: the 1978-97 period marked as the SOE-led economy, the 1998-2015 phase as the investment-driven economy, and the new normal economy since 2016. All three economies have been shaped by the government financial policies, defined as a set of credit policy, monetary policy, and regulatory policy. We analyze the macroeconomic effects of these financial policies throughout the three phases and provide the stylized facts to substantiate our analysis. The stylized facts differ qualitatively across different phases or economies. We argue that the impacts of China's financial policies work through transmission channels different from those in developed economies and that a regime switch from one economy to another was driven mainly by regime changes in financial policies.

Banking and the Macroeconomy in China: A Banking Crisis Deferred?

Open Economies Review, 2014

The downturn in the world economy following the global banking crisis has left the Chinese economy relatively unscathed. This paper develops a model of the Chinese economy using a DSGE framework with a banking sector to shed light on this episode. It differs from other applications in the use of indirect inference procedure to test the fitted model. The model finds that the main shocks hitting China in the crisis were international and that domestic banking shocks were unimportant. However, directed bank lending and direct government spending was used to supplement monetary policy to aggressively offset shocks to demand. The model finds that government expenditure feedback reduces the frequency of a business cycle crisis but that any feedback effect on investment creates excess capacity and instability in output.

Macroeconomic Effects of China’s Financial Policies

Federal Reserve Bank of Atlanta, Working Papers

A Review of China’s Financial System and Initiatives for the Future

The Milken Institute Series on Financial Innovation and Economic Growth, 2009

We provide a comprehensive review of China's financial system, and explore directions of future development. First, the current financial system is dominated by a large banking sector. In recent years banks have made considerable progress in reducing the amount of non-performing loans and improving their efficiency. It is important that these efforts are continued. Second, the role of the stock market in allocating resources in the economy has been limited and ineffective. Further development of China's stock market and other financial markets is the most important task in the long-term. Third, the most successful part of the financial system, in terms of supporting the growth of the overall economy, is a non-standard sector that consists of alternative financing channels, governance mechanisms, and institutions. This sector should coexist with banks and markets in the future in order to continue to support the growth of the Hybrid Sector (non-state, non-listed firms). Finally, in order to sustain stable economic growth, China should aim to prevent and halt damaging financial crises, including a banking sector crisis, a real estate or stock market crash, and a "twin crisis" in the currency market and banking sector.

United States - China external imbalance and the global financial crisis

China Economic Journal, 2010

This paper advances an alternative explanation of the large external imbalance between the United States and China, and its linkages to the current global financial crisis. We show that US current account deficits dated back long before the emergence of China's recent large trade surpluses, with China accounting at its peak for at most one-third of this deficit. The relative rise in China's savings in recent years can be attributed to an increase in its corporate savings, a trend which reflects distortions arising from the transition process from a planned to a market economy.

Macroeconomic policy and response in the chinese economy: The impact of the reform process

Journal of Comparative Economics, 1987

The paper presents a macroeconomic model of the Chinese economy, which is then used to estimate a household saving function for 1957-1978, showing a 3% saving rate. Applying the model to the post-I978 period, the author concludes that the rapid growth in the government budget deficit was accommodated in part by voluntary saving by households and enterprises.

CHINA'S MACROECONOMIC POLICY OPTIONS: A SECTORAL FINANCIAL BALANCES PERSPECTIVE (original) (raw)

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