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How Much Does Investment Drive Economic Growth in China?

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Author Info
Duo Qin () (Queen Mary, University of London)
Marie Anne Cagas (Asian Development Bank)
Pilipinas Quising (Asian Development Bank)
Xin-Hua He (Chinese Academy of Social Sciences)

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Abstract

Investment-driven growth has long been regarded as a key development strategy in China. This paper investigates empirically the validity of this view. Post-1990 data analyses and macroeconometric model simulations show that market demand has become a regular force in driving investment since reforms, that non-demand-driven investment growth contributes to increasing capital-output ratio far more than output growth, that government investment exerts a pivotal role in amplifying investment cycles, albeit effective in promoting employment, and that delayed and rising consumption from current investment surge can help sustain the impact of growth even with constant-returns-to-scale in the long-run GDP.

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Publisher Info
Paper provided by Queen Mary, University of London, Department of Economics in its series Working Papers with number 545.

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Date of creation: Aug 2005
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Handle: RePEc:qmw:qmwecw:wp545

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Related research
Keywords: Investment Growth Impulse response function Cointegration Granger non-causality

Other versions of this item:

Find related papers by JEL classification:
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
R34 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Input Demand Analysis
O23 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
P41 - Economic Systems - - Other Economic Systems - - - Planning, Coordination, and Reform

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