FINANCIAL LIBERALIZATION AND ECONOMIC GROWTH: A THEORETICAL ANALYSIS OF THE TRANSFORMING CHINESE ECONOMY |
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| Authors: | Michael K Y Fung Wai-Ming Ho Lijing Zhu |
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| Institution: | Chinese University of Hong Kong; York University, Toronto; Hong Kong University of Science and Technology |
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| Abstract: | Abstract. We conduct a theoretical investigation into how financial reforms are affecting the long‐run economic performance of the partially reformed Chinese economy. In a model with a dual structure in commodity production and financial repression, allowing the co‐existence of a state banking system and an informal credit market and introducing heterogeneity in the transaction technologies of individuals, we examine the interactions between the state banking system and the informal credit market, and the effects of various measures of financial liberalization on individuals’ optimal portfolio choices and the macroeconomic aggregates. |
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