Rebalancing China's Economy: What Does Growth Theory Tell Us?
AbstractThis paper uses the standard one-sector neoclassical growth model to investigate why China's consumption has been low and investment high. It finds that the low cost of capital has been quantitatively an important factor. Theory predicts that the price of capital may have been significantly distorted in the 1990s and 2000s. The distortion could have been caused by nonperforming loans, borrowing constraints, and uncertainty over changes in government guidance in bank lending. If China is to rebalance growth towards relying more on consumption and less on exports and investment, banking sector reforms and financial market development could, therefore, turn out to be key.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 06/291.
Date of creation: 01 Dec 2006
Date of revision:
Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-04 (All new papers)
- NEP-CNA-2007-05-04 (China)
- NEP-DEV-2007-05-04 (Development)
- NEP-DGE-2007-05-04 (Dynamic General Equilibrium)
- NEP-MAC-2007-05-04 (Macroeconomics)
- NEP-SEA-2007-05-04 (South East Asia)
- NEP-TRA-2007-05-04 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2002. "Accounting for the Great Depression (technical appendix)," Working Papers 619, Federal Reserve Bank of Minneapolis.
- Charles T. Carlstrom & Timothy S. Fuerst, 1996.
"Agency costs, net worth, and business fluctuations: a computable general equilibrium analysis,"
9602, Federal Reserve Bank of Cleveland.
- Carlstrom, Charles T & Fuerst, Timothy S, 1997. "Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis," American Economic Review, American Economic Association, vol. 87(5), pages 893-910, December.
- Finn E. Kydland & Carlos E. J. M. Zarazaga, 2002.
"Argentina's Lost Decade,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 152-165, January.
- Finn E. Kydland & Carlos E. J. M. Zarazaga, 2002. "Online Appendix to Argentina's Lost Decade and the Subsequent Recovery Puzzle," Technical Appendices kydland02, Review of Economic Dynamics.
- Finn E. Kydland & Carlos E.J.M. Zarazaga, 2001. "Argentina's lost decade," Center for Latin America Working Papers 0401, Federal Reserve Bank of Dallas.
- Hans Fehr & Sabine Jokisch & Laurence J. Kotlikoff, 2005. "Will China Eat Our Lunch or Take Us Out to Dinner? Simulating the Transition Paths of the U.S., EU, Japan, and China," NBER Working Papers 11668, National Bureau of Economic Research, Inc.
- Keiichiro Kobayashi & Masaru Inaba, 2006. "Borrowing constraints and protracted recessions," Discussion papers 06011, Research Institute of Economy, Trade and Industry (RIETI).
- Wendy Dobson & Anil K Kashyap, 2006.
"The Contradiction in China’s Gradualist Banking Reforms,"
Working Papers Series
08, Rotman Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
- Wendy Dobson & Anil K. Kashyap, 2006. "The Contradiction in China's Gradualist Banking Reforms," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(2), pages 103-162.
- Steven Barnett & Ray Brooks, 2006. "What's Driving Investment in China?," IMF Working Papers 06/265, International Monetary Fund.
- Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
- Prasad, Eswar & Rajan, Raghuram G., 2006.
"Modernizing China's Growth Paradigm,"
IZA Discussion Papers
2248, Institute for the Study of Labor (IZA).
- Olivier Blanchard & Francesco Giavazzi, 2006.
"Rebalancing Growth in China: A Three-Handed Approach,"
China & World Economy,
Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 14(4), pages 1-20.
- Blanchard, Olivier J & Giavazzi, Francesco, 2006. "Rebalancing Growth in China: A Three-Handed Approach," CEPR Discussion Papers 5403, C.E.P.R. Discussion Papers.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2007.
"Business Cycle Accounting,"
Econometric Society, vol. 75(3), pages 781-836, 05.
- V V Chari & Patrick J Kehoe & Ellen R. McGrattan, 2003. "Business Cycle Accounting," Levine's Bibliography 506439000000000421, UCLA Department of Economics.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2006. "Business cycle accounting," Staff Report 328, Federal Reserve Bank of Minneapolis.
- V. V. Chari & Patrick Kehoe & Ellen McGrattan, 2004. "Business Cycle Accounting," Levine's Bibliography 122247000000000560, UCLA Department of Economics.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2002. "Business cycle accounting," Working Papers 625, Federal Reserve Bank of Minneapolis.
- V.V. Chari & Patrick J. Kehoe & Ellen McGrattan, 2004. "Business Cycle Accounting," NBER Working Papers 10351, National Bureau of Economic Research, Inc.
- Chow, G.C., 1990.
"Capital Formation And Economic Growth In China,"
356, Princeton, Department of Economics - Econometric Research Program.
- Kuijs, Louis, 2005. "Investment and saving in China," Policy Research Working Paper Series 3633, The World Bank.
- Edward C. Prescott, 1997.
"Needed: a theory of total factor productivity,"
242, Federal Reserve Bank of Minneapolis.
- Douglas Gollin, 2002.
"Getting Income Shares Right,"
Journal of Political Economy,
University of Chicago Press, vol. 110(2), pages 458-474, April.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2003.
"Accounting for the Great Depression,"
Federal Reserve Bank of Minneapolis, issue Spr, pages 2-8.
- Suparna Chakraborty, 2005. "Real Estate Prices, Borrowing Constraints and Business Cycles -A Study of the Japanese Economy," Macroeconomics 0504012, EconWPA.
- Gomes, Joao F & Yaron, Amir & Zhang, Lu, 2003.
"Asset Prices and Business Cycles with Costly External Finance,"
CEPR Discussion Papers
3927, C.E.P.R. Discussion Papers.
- Joao F. Gomes & Amir Yaron & Lu Zhang, 2003. "Asset Prices and Business Cycles with Costly External Finance," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(4), pages 767-788, October.
- Joao Gomes & Amir Yaron & Lu Zhang, 2002. "Asset Prices and Business Cycles with Costly External Finance," NBER Working Papers 9364, National Bureau of Economic Research, Inc.
- Franco Modigliani & Shi Larry Cao, 2004. "The Chinese Saving Puzzle and the Life-Cycle Hypothesis," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 145-170, March.
- Nehru, Vikram & Swanson, Eric & Dubey, Ashutosh, 1993. "A new database on human capital stock : sources, methodology and results," Policy Research Working Paper Series 1124, The World Bank.
- Richard Podpiera, 2006. "Progress in China's Banking Sector Reform: Has Bank Behavior Changed?," IMF Working Papers 06/71, International Monetary Fund.
- Aart Kraay, 2000. "Household Saving in China," World Bank Economic Review, World Bank Group, vol. 14(3), pages 545-570, September.
- Bonatti, Luigi & Fracasso, Andrea, 2013. "Regime switches in the Sino-American co-dependency: Growth and structural change in China," Structural Change and Economic Dynamics, Elsevier, vol. 25(C), pages 1-32.
- Alan Heston, 2010. "What Can Be Learned About the Economies of China and India from Purchasing Power Comparisons?," Working Papers id:2777, eSocialSciences.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).
If references are entirely missing, you can add them using this form.