Financial market reform – A new driver for China’s economic growth?

Yu-Fu Chen, Michael Funke, Kunyu Tao

    Research output: Working paperDiscussion paper

    Abstract

    This paper analyses the financial distortions – growth nexus in China using a tractable general equilibrium modelling approach in which heterogeneous private and state-owned firms interact. The focal points of the model are financial frictions and reallocations of factors of production across firms. The calibrated version of the model elicits the important message that the adoption of a comprehensive financial market reform package abolishing financial distortions will lead to substantial output gains. Thus, structural policies leading to more efficient allocation of factors of production will remain a key policy challenge in China in the years to come.
    Original languageEnglish
    Place of PublicationHelsinki
    PublisherBank of Finland, BOFIT Institute for Economies in Transition
    Number of pages38
    Volume2015
    ISBN (Electronic)1456-5889
    ISBN (Print)978-952-323-026-2
    Publication statusPublished - 13 Feb 2015

    Keywords

    • financial distortions
    • financial liberalisation
    • general equilibrium model
    • China

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