Short Run Effects of The Economic Reform Agenda

Rodney Tyers and Ying Zhang
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Ying Zhang: Business School, University of Western Australia

No 14-16, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: China’s size limits its capacity to source further growth from exports and so the inevitable turn inward is in progress. Thus far, key home policy drivers have been fiscal expansion and public investment, though provincial indebtedness will constrain these in future and growth will be driven by the reform agenda, including further industrial reform and “internationalisation”. The short run effects of these domestic policy and external shocks are examined using a model of the Chinese economy that takes explicit account of oligopoly behaviour. The results confirm that industrial reform in heavy manufacturing and services would reduce costs and foster growth in output, private consumption and modern sector employment. At the same time, while China’s private investment will be sensitive to the uncertain effects of internationalisation, increased nominal exchange rate flexibility would offer a reliable cushion.

Pages: 39 pages
Date: 2014
New Economics Papers: this item is included in nep-cna and nep-tra
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