Optimal Capital Account Liberalization in China : Data and Replication Code, Working Paper 2018-10

Liu, Zheng; Spiegel, Mark M.; Zhang, Jingyi

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Optimal Capital Account Liberalization in China : Data and Replication Code, Working Paper 2018-10

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Optimal Capital Account Liberalization in China : Data and Replication Code, Working Paper 2018-10

DATE: May 27, 2020

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Working Papers (Federal Reserve Bank of San Francisco)

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China maintains tight controls over its capital account. Its current policy regime also features financial repression, under which banks are required to extend funds to state-owned enterprises (SOEs) at favorable terms, despite their lower productivity than private firms on average. We incorporate these features into a general equilibrium model. Our model illustrates a tradeoff between aggregate productivity and inter-temporal allocative efficiency from capital account liberalization under financial repression. As a result, along a transition path with a declining SOE share, welfare-maximizing policy calls for rapid removal of financial repression, but gradual liberalization of the capital account.

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Federal Reserve Bank of San Francisco. "Optimal Capital Account Liberalization in China : Data and Replication Code, Working Paper 2018-10" in Working Papers (Federal Reserve Bank of San Francisco) (May 27, 2020). https://fraser.stlouisfed.org/title/7038/item/639804/content/zip/frbsf_pacificBasin_wp2018-10_replicationCode, accessed on March 16, 2025.

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DIGITAL COPY SOURCE: https://www.frbsf.org/wp-content/uploads/sites/4/wp2014-04.pdf

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