Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/109072
Authors: 
Le, Vo Phuong Mai
Matthews, Kent
Meenagh, David
Minford, Patrick
Xiao, Zhiguo
Year of Publication: 
2015
Series/Report no.: 
Cardiff Economics Working Papers E2015/1
Abstract: 
This paper develops a model of the Chinese economy using a DSGE framework that accommodates a banking sector and money. The model is used to shed light on the period of the recent period of financial crisis. It differs from other applications in the use of indirect inference to estimate and test the fitted model. We find that the main shocks that hit China in the crisis were international and that domestic banking shocks were unimportant. Officially mandated bank lending and government spending were used to supplement monetary policy to aggressively offset shocks to demand. An analysis of the frequency of crises shows that crises occur on average about every half-century, with about a third accompanied by financial crises. We find that monetary policy can be used more vigorously to stabilise the economy, making direct banking controls and fiscal activism unnecessary.
Subjects: 
DSGE model
Financial Frictions
China
Crises
Indirect Inference
Money
Credit
JEL: 
E3
E44
E52
C1
Document Type: 
Working Paper

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