EconPapers    
Economics at your fingertips  
 

Interest-Rate Liberalization and Capital Misallocations

Zheng Liu (), Pengfei Wang () and Zhiwei Xu ()

No 2017-15, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: We study the consequences of interest-rate liberalization in a two-sector general equilibrium model of China. The model captures a key feature of China's distorted financial system: state-owned enterprises (SOEs) have greater incentive to expand production and easier access to credit than private firms. In this second-best environment, liberalizing interest rate controls improves capital allocations within each sector, but exacerbates misallocations across sectors. Under calibrated parameters, interest-rate liberalization may reduce aggregate productivity and welfare, unless other policy reforms are also implemented to alleviate SOEs' distorted incentives or improve private firms' credit access.

JEL-codes: E44 G18 O41 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2017-05-01
New Economics Papers: this item is included in nep-cna, nep-mac and nep-tra
Note: Date of publication: May 2017.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www.frbsf.org/economic-research/files/wp2017-15.pdf Full text (application/pdf)

Related works:
Journal Article: Interest Rate Liberalization and Capital Misallocations (2021) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2017-15

Ordering information: This working paper can be ordered from

DOI: 10.24148/wp2017-15

Access Statistics for this paper

More papers in Working Paper Series from Federal Reserve Bank of San Francisco Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2021-08-04
Handle: RePEc:fip:fedfwp:2017-15