No . E 2015 / 1 China ’ s financial crisis – the role of banks and monetary policy (original) (raw)
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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.
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Federal Reserve Bank of Atlanta, Working Papers
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CHINA'S MACROECONOMIC POLICY OPTIONS: A SECTORAL FINANCIAL BALANCES PERSPECTIVE
This paper attempts to discern the macroeconomic policy options open to China after its stock market crash in August 2015. While several facts and figures on different facets of the Chinese economy keep pouring in – high levels household savings, rising indebtedness of private sector, slowing GDP growth rates, contracting current account surplus, and many more – it is difficult to get a holistic picture of the Chinese macroeconomy and the policy options that it has in wake of the significant changes taking place. The Sectoral Financial Balances (SFB) model, which has its basis in a simple accounting identity, provides a simple, consistent and logical framework that can help us work through the fog and put these facts and figures in perspective. At the same it allows us to trace the movement of the economy through time and draw insights into the possible trajectory of the economy given trends in various macroeconomic parameters. From our analysis, can we say that China is heading towards a major crisis? And what could be the possible policy response of the Chinese government in averting such a crisis? These are important questions that need urgent answers.
Journal of Money and Economy
This study investigates monetary and financial shocks on macroeconomic variables, focusing on the role of banking intervention. For this purpose, a Keynesian dynamic stochastic general equilibrium (DSGE) model is designed for Iran's economy that involves financial and banking sectors. The results of the model simulation show that the financial accelerator theory works in the Iranian economy. Also, the intermediary role is confirmed by the impulse response function. In other words, economic policies can impress on macroeconomic indicators more when banks intervene in the economy. Therefore, to control the effects of economic shocks on banks' performance, it has been suggested that monetary policymakers pay attention to the important roles of financial markets in the transfer mechanism and monetary policy intensity. On the other hand, because of mandatory rules of interest rates determination, banks have to establish a commission and nonprofit services instead of sharing income to decrease the effect of economic shocks.