Financial repression, SOE reform and fiscal-monetary policy coordination
We build a dynamic stochastic general equilibrium (DSGE) model with financial repression and conduct estimation and simulation with it using aggregate data. We discuss the interaction and optimal combination of fiscal and monetary policies when the model features SOE monopoly and financial repressio...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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KeAi Communications Co. Ltd.
2022-06-01
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| Series: | China Economic Quarterly International |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2666933122000223 |
| _version_ | 1828086134942466048 |
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| author | Huabin Wu Zhenyang Xu Ping Yan |
| author_facet | Huabin Wu Zhenyang Xu Ping Yan |
| author_sort | Huabin Wu |
| collection | DOAJ |
| description | We build a dynamic stochastic general equilibrium (DSGE) model with financial repression and conduct estimation and simulation with it using aggregate data. We discuss the interaction and optimal combination of fiscal and monetary policies when the model features SOE monopoly and financial repression. We find that under current situation, fiscal policy should play a bigger role in stabilizing output, while monetary policy ought to pay more attention to combatting inflation. Although private firms' limited access to credit can be attributed to financial repression and SOE monopoly, financial repression is a second-best policy, in that it promotes SOE's output via cheap credit when SOEs behave like monopolists. This offsets the efficiency loss associated with monopoly. Moreover, our policy experiments show that the optimal fiscal policy can respond less to output fluctuations, when SOE reforms dampen the significance of financial repression. |
| first_indexed | 2024-04-11T04:51:05Z |
| format | Article |
| id | doaj.art-7133e457f1ee4deebc43533af5b12fa4 |
| institution | Directory Open Access Journal |
| issn | 2666-9331 |
| language | English |
| last_indexed | 2024-04-11T04:51:05Z |
| publishDate | 2022-06-01 |
| publisher | KeAi Communications Co. Ltd. |
| record_format | Article |
| series | China Economic Quarterly International |
| spelling | doaj.art-7133e457f1ee4deebc43533af5b12fa42022-12-27T04:38:51ZengKeAi Communications Co. Ltd.China Economic Quarterly International2666-93312022-06-0122151163Financial repression, SOE reform and fiscal-monetary policy coordinationHuabin Wu0Zhenyang Xu1Ping Yan2Institute for Advanced Studies, Shanghai University of Finance and Economics, China; Key Laboratory of Mathematical Economics, Ministry of Education (Shanghai University of Finance and Economics), ChinaNational School of Development, Peking University, China; School of Economics and Management, Tsinghua University, China; Corresponding author. National School of Development, Peking University, China.School of Public Finance and Taxation, Zhongnan University of Economics and Law, ChinaWe build a dynamic stochastic general equilibrium (DSGE) model with financial repression and conduct estimation and simulation with it using aggregate data. We discuss the interaction and optimal combination of fiscal and monetary policies when the model features SOE monopoly and financial repression. We find that under current situation, fiscal policy should play a bigger role in stabilizing output, while monetary policy ought to pay more attention to combatting inflation. Although private firms' limited access to credit can be attributed to financial repression and SOE monopoly, financial repression is a second-best policy, in that it promotes SOE's output via cheap credit when SOEs behave like monopolists. This offsets the efficiency loss associated with monopoly. Moreover, our policy experiments show that the optimal fiscal policy can respond less to output fluctuations, when SOE reforms dampen the significance of financial repression.http://www.sciencedirect.com/science/article/pii/S2666933122000223E52G10E63 |
| spellingShingle | Huabin Wu Zhenyang Xu Ping Yan Financial repression, SOE reform and fiscal-monetary policy coordination China Economic Quarterly International E52 G10 E63 |
| title | Financial repression, SOE reform and fiscal-monetary policy coordination |
| title_full | Financial repression, SOE reform and fiscal-monetary policy coordination |
| title_fullStr | Financial repression, SOE reform and fiscal-monetary policy coordination |
| title_full_unstemmed | Financial repression, SOE reform and fiscal-monetary policy coordination |
| title_short | Financial repression, SOE reform and fiscal-monetary policy coordination |
| title_sort | financial repression soe reform and fiscal monetary policy coordination |
| topic | E52 G10 E63 |
| url | http://www.sciencedirect.com/science/article/pii/S2666933122000223 |
| work_keys_str_mv | AT huabinwu financialrepressionsoereformandfiscalmonetarypolicycoordination AT zhenyangxu financialrepressionsoereformandfiscalmonetarypolicycoordination AT pingyan financialrepressionsoereformandfiscalmonetarypolicycoordination |