A Macro-Theoretic Model of the Chinese Economy

Posted: 11 Jul 1997

See all articles by John Bennett

John Bennett

Brunel University London - Economics and Finance; Institute for the Study of Labor (IZA); University of Wales, Swansea - School of Business and Economics; Centre for Economic Policy Research (CEPR)

Huw David Dixon

University of York - Department of Economics and Related Studies; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: May 1996

Abstract

A stylized model of the Chinese economy is developed with three production sectors: agriculture, non-traded industrial goods, and industrial exports. The state purchases food from farmers by dual-track pricing; urban food sales are subsidized through ration coupons. Marginal prices clear markets except that currency controls constrain the availability of intermediates, the only imports. Devaluation is found to stimulate real variables, but deflates money variables; the reverse occurs with monetary expansion or raising the plan-track food procurement price. Lowering urban food subsidies or raising enterprise taxation reduces the budget deficit, reduces open and disguised unemployment, and deflates nominal prices.

JEL Classification: O11, P21, P52

Suggested Citation

Bennett, John and Dixon, Huw David, A Macro-Theoretic Model of the Chinese Economy (May 1996). CEPR Discussion Paper No. 1370. Available at SSRN: https://ssrn.com/abstract=11065

John Bennett (Contact Author)

Brunel University London - Economics and Finance ( email )

Uxbridge UB8 3PH
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+44 1895 816 201 (Phone)
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Institute for the Study of Labor (IZA)

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University of Wales, Swansea - School of Business and Economics ( email )

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Centre for Economic Policy Research (CEPR)

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Huw David Dixon

University of York - Department of Economics and Related Studies ( email )

Heslington
York, YO1 5DD
United Kingdom
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+01904 433 759 (Fax)

HOME PAGE: http://www.york.ac.uk/depts/econ/res/indiv/dixon.h

CESifo (Center for Economic Studies and Ifo Institute)

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