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“Big Bang†Versus Gradualism in Economic Reforms: An Intertemporal Analysis with an Application to China

  • Andrew Feltenstein
  • Saleh M. Nsouli

This paper reviews briefly the controversy in the literature concerning the speed of adjustment and sequencing of reforms, and presents a model parameterized with Chinese data. The model is used to generate different policy simulations to illustrate some of the key issues in the debate on the speed and sequencing of reforms, and not to provide a basis for policy recommendations for China. The simulations highlight the importance of the criteria being used for determining speed and sequencing. The paper also underscores the limitations involved in attempting to derive conclusions from the model, given the complexity of the issues.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/98.

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Length: 40
Date of creation: 01 Aug 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/98
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  1. Andrew Feltenstein, 2000. "Bank Failures and Fiscal Austerity: Policy Presecriptions for a Developing Country," IMF Working Papers 00/90, International Monetary Fund.
  2. David Burton & Wanda Tseng & Kalpana Kochhar & Hoe Ee Khor & Dubravko Mihaljek, 1994. "Economic Reform in China: A New Phase," IMF Occasional Papers 114, International Monetary Fund.
  3. Stanley Fischer & Alan Gelb, 1991. "The Process of Socialist Economic Transformation," Journal of Economic Perspectives, American Economic Association, vol. 5(4), pages 91-105, Fall.
  4. Naughton, Barry, 1987. "Macroeconomic policy and response in the chinese economy: The impact of the reform process," Journal of Comparative Economics, Elsevier, vol. 11(3), pages 334-353, September.
  5. Funke, Norbert, 1993. "Timing and Sequencing of Reforms: Competing Views and the Role of Credibility," Kyklos, Wiley Blackwell, vol. 46(3), pages 337-62.
  6. Dani Rodrik, 1989. "Credibility of Trade Reform — a Policy Maker's Guide," The World Economy, Wiley Blackwell, vol. 12(1), pages 1-16, 03.
  7. Funke, Norbert, 1993. "Timing and sequencing of reforms: Competing views," Kiel Working Papers 552, Kiel Institute for the World Economy.
  8. Michael Mussa, 1984. "The Adjustment Process and the Timing of Trade Liberalization," NBER Working Papers 1458, National Bureau of Economic Research, Inc.
  9. Lal, Deepak, 1987. "The Political Economy of Economic Liberalization," World Bank Economic Review, World Bank Group, vol. 1(2), pages 273-99, January.
  10. Gary H. Jefferson & Thomas G. Rawski, 1994. "Enterprise Reform in Chinese Industry," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 47-70, Spring.
  11. Jefferson, Gary H. & Xu, Wenyi, 1991. "The impact of reform on socialist enterprises in transition: Structure, conduct, and performance in Chinese industry," Journal of Comparative Economics, Elsevier, vol. 15(1), pages 45-64, March.
  12. Portes, Richard & Santorum, Anita, 1987. "Money and the consumption goods market in China," Journal of Comparative Economics, Elsevier, vol. 11(3), pages 354-371, September.
  13. Shahid Yusuf, 1994. "China's Macroeconomic Performance and Management during Transition," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 71-92, Spring.
  14. William Easterly & Sergio Rebelo, 1993. "Fiscal Policy and Economic Growth: An Empirical Investigation," NBER Working Papers 4499, National Bureau of Economic Research, Inc.
  15. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-51, September.
  16. Eric S. Maskin, 1999. "Recent Theoretical Work on the Soft Budget Constraint," American Economic Review, American Economic Association, vol. 89(2), pages 421-425, May.
  17. Groves, Theodore, et al, 1994. "Autonomy and Incentives in Chinese State Enterprises," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 183-209, February.
  18. Michael Gavin, 1996. "Unemployment and the economics of gradualist policy reform," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 1(3), pages 239-258.
  19. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1992. "The Transition to a Market Economy: Pitfalls of Partial Reform," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 889-906, August.
  20. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  21. Loren Brandt & Xiaodong Zhu, 2000. "Redistribution in a Decentralized Economy: Growth and Inflation in China under Reform," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 422-451, April.
  22. Feltenstein, Andrew & Lebow, David & van Wijnbergen, Sweder, 1990. "Savings, Commodity Market Rationing, and the Real Rate of Interest in China," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(2), pages 234-52, May.
  23. Michael W. Bell & Kalpana Kochhar & Hoe Ee Khor, 1993. "China at the Threshold of a Market Economy," IMF Occasional Papers 107, International Monetary Fund.
  24. Hofman, Bert, 1993. "An analysis of Chinese fiscal data over the reform period," China Economic Review, Elsevier, vol. 4(2), pages 213-230.
  25. Qian, Yingyi & Xu, Chenggang, 1998. "Innovation and Bureaucracy under Soft and Hard Budget Constraints," Review of Economic Studies, Wiley Blackwell, vol. 65(1), pages 151-64, January.
  26. Blejer, Mario I. & Feldman, Ernesto V. & Feltenstein, Andrew, 2002. "Exogenous shocks, contagion, and bank soundness: a macroeconomic framework," Journal of International Money and Finance, Elsevier, vol. 21(1), pages 33-52, February.
  27. Feltenstein, Andrew & Ha, Jiming, 1991. "Measurement of repressed inflation in China : The lack of coordination between monetary policy and price controls," Journal of Development Economics, Elsevier, vol. 36(2), pages 279-294, October.
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