BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
Financial market reform – A new driver for China’s economic growth?
(), Michael Funke
() and Kunyu Tao
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.
Keywords: financial distortions; financial liberalisation; general equilibrium model; China; (follow links to similar papers)
JEL-Codes: C68; G10; G38; O10; (follow links to similar papers)
38 pages, February 23, 2015
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