Monetary Policy and Credit in China: A Theoretical Analysis

Huw Dixon

No 1906, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: A three-sector macromodel of China’s economy is developed, in which the activity of state-owned enterprises (SOEs) is constrained by the state-imposed credit plan for working capital. Our analysis indicates the weakness of credit control and interest rate variation as anti-inflationary tools. In contrast, the hardening of SOEs’ budget constraints is an effective device. The existence of credit and currency controls tends to make devaluation contractionary. Furthermore, because of general equilibrium repercussions, policies that boost industrial exports tend to reduce welfare in rural areas, where poverty is concentrated.

Keywords: China; Credit; Macroeconomic; Money (search for similar items in EconPapers)
JEL-codes: O11 O23 P21 (search for similar items in EconPapers)
Date: 1998-06
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Citations: View citations in EconPapers (3)

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Journal Article: Monetary Policy and Credit in China: A Theoretical Analysis (2001)
Working Paper: Monetary Policy and Credit in China: a Theoretical Analysis
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