Monetary Policy and Credit in China: a Theoretical Analysis

Huw Dixon and John Bennett ()

Discussion Papers from Department of Economics, University of York

Abstract: A three-sector macro model of the Chinese 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 weaknesses of credit control and nominal interest rate increases as tools for holding down the price level; but the hardening of SOEs’ budget constraints is found to be an effective device. The existence of credit and currency controls tends to make devaluation contractionary. Because of general equilibrium repercussions, policies that boost industrial exports tend to reduce welfare in the agricultural sector, where poverty is concentrated.

JEL-codes: O11 O23 P21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn, nep-mon and nep-pbe
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Related works:
Journal Article: Monetary Policy and Credit in China: A Theoretical Analysis (2001)
Working Paper: Monetary Policy and Credit in China: A Theoretical Analysis (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:98/17

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