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China’S Macroeconomic Policy Options: A Sectoral Financial Balances Perspective

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  • SIVRAMKRISHNA Sashi

    (Narsee Monjee Institute of Management Studies, Bengaluru, India)

Abstract

This paper attempts to discern the macroeconomic policy options open to China after its stock market crash in August 2015. While several facts and figures on different facets of the Chinese economy keep pouring in – high levels household savings, rising indebtedness of private sector, slowing GDP growth rates, contracting current account surplus, and many more – it is difficult to get a holistic picture of the Chinese macroeconomy and the policy options that it has in wake of the significant changes taking place. The Sectoral Financial Balances (SFB) model, which has its basis in a simple accounting identity, provides a simple, consistent and logical framework that can help us work through the fog and put these facts and figures in perspective. At the same it allows us to trace the movement of the economy through time and draw insights into the possible trajectory of the economy given trends in various macroeconomic parameters. From our analysis, can we say that China is heading towards a major crisis? And what could be the possible policy response of the Chinese government in averting such a crisis? These are important questions that need urgent answers.

Suggested Citation

  • SIVRAMKRISHNA Sashi, 2016. "China’S Macroeconomic Policy Options: A Sectoral Financial Balances Perspective," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 11(1), pages 152-163, April.
  • Handle: RePEc:blg:journl:v:11:y:2016:i:1:p:152-163
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    References listed on IDEAS

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    1. Sadia Tahir, 2006. "Core Inflation Measures for Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 2, pages 319-342.
    2. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    3. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    4. Neil R. Ericsson & James G. MacKinnon, 1999. "Distributions of error correction tests for cointegration," International Finance Discussion Papers 655, Board of Governors of the Federal Reserve System (U.S.).
    5. Neil R. Ericsson & James G. MacKinnon, 2002. "Distributions of error correction tests for cointegration," Econometrics Journal, Royal Economic Society, vol. 5(2), pages 285-318, June.
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