A Bridge on Economic Issues between China and the World
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Outward FDI and Domestic Input Distortions: Evidence from Chinese Firms
Cheng Chen, Wei Tian, Miaojie Yu, Sep 08, 2021A recent study shows that domestic input distortions faced by private firms in China have generated extra incentives for those firms to invest and produce abroad. This finding helps explain an astonishing increase in China’s outward foreign direct investment (FDI) flows since the financial crisis.
Structural Change and the Stability of Aggregate Employment in China
Wen Yao, Xiaodong Zhu, Oct 27, 2021In developed countries, aggregate employment has a strong positive correlation with aggregate output, and it is almost as volatile as output. In China, the correlation of aggregate employment and output is close to zero, and the volatility of aggregate employment is very low. We argue that the key to understanding the stability of aggregate employment in China is labor reallocation between the agricultural and non-agricultural sectors, and that the declining relative demand...
Local Government Financial Constraint and Spending Multiplier in China
Yang Su, Dec 28, 2022Local fiscal policies have been very effective in China since 2000.
Housing Wealth and Online Consumer Behavior: Evidence from the Xiong’an New Area in China
Hanming Fang, Long Wang, Yang Yang, Nov 16, 2022We provide new evidence on the causal effects of housing wealth on consumer behavior.
Interest rates and exchange rates when the money supply goes up
Saleem Bahaj, Ricardo Reis, May 21, 2025The power of monetary policy to affect interest rates and exchange rates depends on the downward slope of the demand function. This column uses the Chinese experiment with parallel currencies to study the impact of sudden increases in money supply. The authors find causal evidence that increases in money supply lead to currency depreciations, and use this to quantify the interest elasticity of reserve demand. The results can be used to understand how the People’s Bank of China maintained the peg between the mainland and parallel currencies.
