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Population Aging, Credit Market Frictions, and Chinese Economic Growth

Author

Listed:
  • Michael Dotsey
  • Wenli Li
  • Fang Yang

Abstract

We build a unified framework to quantitatively examine population aging and credit market frictions in contributing to Chinese economic growth between 1977 and 2014. We find that demographic changes together with endogenous human capital accumulation account for a large part of the rise in per capita output growth, especially after 2007, as well as some of the rise in savings. Credit pol-icy changes initially alleviate the capital misallocation between private and public firms and lead to significant increases in both savings and output growth. Later, they distort capital allocation. While contributing to further increase in savings, the distortion slows down economic growth. Among factors that we consider, increased life expectancy and financial development in the form of reduced inter-mediation cost are the most important in driving the dynamics of savings and growth.

Suggested Citation

  • Michael Dotsey & Wenli Li & Fang Yang, 2019. "Population Aging, Credit Market Frictions, and Chinese Economic Growth," Working Papers 19-55, Federal Reserve Bank of Philadelphia, revised 20 Dec 2019.
  • Handle: RePEc:fip:fedpwp:86688
    DOI: 10.21799/frbp.wp.2019.55
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    File URL: https://philadelphiafed.org/-/media/research-and-data/publications/working-papers/2019/wp19-55.pdf
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Two papers on Chinese Growth
      by Christian Zimmermann in NEP-DGE blog on 2020-01-20 20:44:55

    More about this item

    Keywords

    Output growth; Household saving; Credit policy; China; Aging;

    JEL classification:

    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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