Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/176242 
Authors: 
Year of Publication: 
2008
Series/Report no.: 
Working Paper No. 224
Publisher: 
Indian Council for Research on International Economic Relations (ICRIER), New Delhi
Abstract: 
This paper uses the standard one-sector neoclassical growth model to investigate why China's consumption has been low and investment high. It finds that the low cost of capital has been quantitatively an important factor. Theory predicts that the price of capital may have been significantly distorted in the 1990s and 2000s. The distortion could have been caused by nonperforming loans, borrowing constraints, and uncertainty over changes in government guidance in bank lending. In one form or the other, these distortions have implied significant transfers from households to firms. If China is to rebalance growth towards relying more on consumption and less on exports and investment, banking sector reforms and financial market development could, therefore, turn out to be key.
Subjects: 
Business cycle accounting
rebalancing growth
financial distortions
JEL: 
E21
E22
O4
O53
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.