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

Author

Listed:
  • Chen, Yu-Fu
  • Funke, Michael
  • Tao, Kunyu

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. Publication keywords: financial distortions, financial liberalisation, general equilibrium model, China

Suggested Citation

  • Chen, Yu-Fu & Funke, Michael & Tao, Kunyu, 2015. "Financial market reform – A new driver for China’s economic growth?," BOFIT Discussion Papers 5/2015, Bank of Finland, Institute for Economies in Transition.
  • Handle: RePEc:bof:bofitp:2015_005
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    References listed on IDEAS

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    Cited by:

    1. Jeremy Greenwood & Juan Sanchez & Cheng Wang, 2013. "Quantifying the Impact of Financial Development on Economic Development," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 194-215, January.

    More about this item

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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