Credit policies, macroeconomic stability and welfare: The case of China

Minetti, Raoul and Peng, Tao,(2018), Credit policies, macroeconomic stability and welfare: The case of China. , Journal of Comparative Economics 46 (2018) 35–52, UNSPECIFIED

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Using a new Keynesian DSGE model with credit constraints, we study the impact on macroeconomic volatility of a macroprudential credit policy of the type implemented by the Central Bank of China. We find that the countercyclical credit policy plays a non- negligible role in stabilizing the real economy, and that this effect is distinctly more pro- nounced when credit conditions are looser. By means of a second-order approximation method, we show that the macroprudential credit policy can significantly boost welfare, benefiting the entrepreneurial sector more than the household sector. The results can yield insights for the institutional and policy setting of China and other emerging countries. Journal of Comparative Economics 46 (2018) 35–52. Michigan State University, 486 W. Circle Drive, 110 Marshall-Adams Hall, East Lansing, MI 48824-1038, USA; Southwestern Univer- sity of Finance and Economics, China.
Keywords : Credit policy Macroeconomic volatility Welfare, UNSPECIFIED
Journal or Publication Title: Journal of Comparative Economics 46 (2018) 35–52
Volume: 46
Item Type: Article
Subjects: Ekonomi Pembangunan
Depositing User: Elok Inajati
Date Deposited: 27 Dec 2019 02:00
Last Modified: 27 Dec 2019 02:00

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