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on China |
| By: | Yuanyan Sophia Zhang |
| Abstract: | This paper analyzes the role of credit market imperfection and sectoral asymmetry as a means through which shocks to the real economy are propagated and amplified. Drawing on firm-level data to calibrate the model, our simulations capture two key stylized facts of the Chinese economy: that credit constraints are more binding in nontradable sectors than in tradable industries and that output volatility is much greater in China than in industrial economies. We find that the driving force behind our simulation results is strongly related to the non-uniform nature of credit market imperfections in China and their implications for resource allocation and the way in which the economy reacts to shocks. Correctly capturing these macro-financial interactions are essential to understand the dynamic behavior of the Chinese economy. |
| Keywords: | Business cycles , China , Credit , Economic models , |
| Date: | 2011–05–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/118&r=cna |
| By: | Yu-Fu Chen (University of Dundee); Michael Funke (Hamburg University and Hong Kong Institute for Monetary Research); Aaron Mehrotra (Bank of Finland) |
| Abstract: | This paper adds to the literature on wealth effects on consumption by disentangling house price effects on consumption for mainland China. In a stochastic modelling framework, the riskiness, rate of increase and persistence of house price movements have different implications for the consumption/housing ratio. We exploit the geographical variation in property prices by using a quarterly city-level panel dataset for the period 1998Q1 - 2009Q4 and rely on a panel error correction model. Overall, the results suggest a significant long run impact of property prices on consumption. They also broadly confirm the predictions from the theoretical model. |
| Keywords: | Consumption, House Prices, China, Panel Data |
| JEL: | E21 R31 C23 O53 |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:152011&r=cna |