Credit Market Imperfection and Sectoral Asymmetry of Chinese Business Cycle
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
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.
Series:
Working Paper No. 2011/118
Subject:
Bank credit Business cycles Credit Economic growth Financial statements Foreign exchange Money Public financial management (PFM) Real exchange rates
English
Publication Date:
May 1, 2011
ISBN/ISSN:
9781455262410/1018-5941
Stock No:
WPIEA2011118
Pages:
35
Please address any questions about this title to publications@imf.org