Does Financial Repression Inhibit or Facilitate Economic Growth? A Case Study of Chinese Reform Experience

23 Pages Posted: 22 Nov 2011

See all articles by Yiping Huang

Yiping Huang

Peking University, National School of Development

Xun Wang

Peking University

Date Written: December 2011

Abstract

This article examines the impact of financial repression on economic growth during China's reform period. The aggregate financial repression index suggests that China's financial liberalization has been steady but gradual. Empirical estimation confirms that, on average, repressive policies helped economic growth, thanks probably to the prudent liberalization approach. But the impact turned from positive in the 1980s and the 1990s to negative in the 2000s, suggesting rising efficiency losses in recent years. Specifically, we find that lending to the state sector, interest rate regulation and capital account control were the main factors constraining China's economic growth in recent years.

JEL Classification: E44, G18, O53

Suggested Citation

Huang, Yiping and Wang, Xun, Does Financial Repression Inhibit or Facilitate Economic Growth? A Case Study of Chinese Reform Experience (December 2011). Oxford Bulletin of Economics and Statistics, Vol. 73, Issue 6, pp. 833-855, 2011, Available at SSRN: https://ssrn.com/abstract=1963042 or http://dx.doi.org/10.1111/j.1468-0084.2011.00677.x

Yiping Huang (Contact Author)

Peking University, National School of Development ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

Xun Wang

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

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