Macroeconomic Effects of China's Financial Policies

40 Pages Posted: 28 Jan 2019 Last revised: 29 Apr 2020

See all articles by Kaiji Chen

Kaiji Chen

Emory University - Department of Economics; Federal Reserve Bank of Atlanta

Tao A. Zha

Federal Reserve Bank of Atlanta; Emory University

Multiple version iconThere are 2 versions of this paper

Date Written: 2018-11-01

Abstract

The Chinese economy has undergone three major phases: the 1978–97 period marked as the SOE-led economy, the 1998–2015 phase as the investment-driven economy, and the new normal economy since 2016. All three economies have been shaped by the government financial policies, defined as a set of credit policy, monetary policy, and regulatory policy. We analyze the macroeconomic effects of these financial policies throughout the three phases and provide the stylized facts to substantiate our analysis. The stylized facts differ qualitatively across different phases or economies. We argue that the impacts of China's financial policies work through transmission channels different from those in developed economies and that a regime switch from one economy to another was driven mainly by regime changes in financial policies.

Keywords: marketized tools, regime change, growth, investment, capital intensity, local governments, regulations, shadow banking, debts, real estate, preferential credits, industrialization, SOEs, POEs, heavy and light sectors, monetary stimulus, trends and cycles

JEL Classification: E5, G1, G28, O2

Suggested Citation

Chen, Kaiji and Zha, Tao A., Macroeconomic Effects of China's Financial Policies (2018-11-01). FRB Atlanta Working Paper No. 2018-12, Available at SSRN: https://ssrn.com/abstract=3323248 or http://dx.doi.org/10.29338/wp2018-12

Kaiji Chen (Contact Author)

Emory University - Department of Economics ( email )

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Tao A. Zha

Federal Reserve Bank of Atlanta ( email )

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