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Monetary policy and credit in China: A theoretical analysis

Bennett, John and Dixon, Huw David 2001. Monetary policy and credit in China: A theoretical analysis. Journal of Macroeconomics 23 (2) , pp. 297-314. 10.1016/S0164-0704(01)00166-5

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A three-sector 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 variation as tools for influencing 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. Furthermore, because of general equilibrium repercussions, policies that boost industrial exports tend to reduce welfare in the agricultural sector, where poverty is concentrated.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
Publisher: Elsevier
ISSN: 0164-0704
Last Modified: 04 Jun 2017 04:24

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