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"Savings, Commodity Market Rationing, and the Real Rate of Interest in China"

Posted: 26 Apr 2006  

Andrew Feltenstein

Georgia State University - Department of Economics

David E. Lebow

U.S. Federal Reserve Board - Macroeconomic Analysis Section

Sweder van Wijnbergen

Universiteit van Amsterdam; Tinbergen Institute; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Abstract

We explain the rapid increase in personal savings in China since the economic liberalization which began in 1979. We use an intertemporal disequilibrium framework based upon a virtual price technique. The virtual price is defined as the price level that would induce the observed level of consumption in the absence of price controls. We find that normalizing savings by virtual prices explains savings behavior better than does normalizing by official price series. We then provide a test which suggests that rationing was perceived to be termporary. Using virtual prices, we find a negative and significant real interest rate effct on consumption. Finally, we find that the nominal interest rate has been important in influencing savings behavior in China.

Keywords: China, rationing, repressed inflation, interest rates

JEL Classification: E21,O23, P22

Suggested Citation

Feltenstein, Andrew and Lebow, David E. and van Wijnbergen, Sweder, "Savings, Commodity Market Rationing, and the Real Rate of Interest in China". Journal of Money, Credit and Banking, Vol. 22, No. 2, May 1990. Available at SSRN: https://ssrn.com/abstract=898225

Andrew Feltenstein (Contact Author)

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States
404-4130093 (Phone)

David E. Lebow

U.S. Federal Reserve Board - Macroeconomic Analysis Section ( email )

20th & C. St., N.W.
Mailstop 80
Washington, DC 20551
United States
202-452-3057 (Phone)
202-452-3819 (Fax)

Sweder Van Wijnbergen

Universiteit van Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4011 / 4203 (Phone)
+31-35-624 91 82 (Fax)

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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