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Frontiers of Economics in China

, Volume 3 Issue 2

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Monetary policy under fixed exchange regime: A study on the future monetary policy in China
GONG Gang , GAO Jian
Front. Econ. China. 2008, 3 (2): 169-208.  https://doi.org/10.1007/s11459-008-0008-6
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Using a macro dynamic model that is specified for the current Chinese economy, we investigate the monetary policy in China under the assumption that the capital market was “open” under WTO frame-work while the exchange rate was fixed. Our purpose here is to find whether it is possible for China in this case to keep the effective monetary policy for stabilizing the domestic economy. For this, we suggest some institutional arrangements (or restrictions). Given these institutional restrictions, we find that not only the monetary policy can still be effective but also the fixed exchange regime will strengthen the macroeconomic stability shared by both the domestic economy and the economy of its trade partners. The dynamic analysis of the model further shows that the under-valued RMB is necessary for the target exchange rate to be sustainable. Finally, due to the import pattern of the current Chinese economy, RMB appreciation will not help to resolve the trade deficit problem in the Western economy with respect to China.
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Money demand elasticity, effective money supply and money market disequilibrium: “China’s Puzzle” and long-term excessive liquidity
LI Zhiguo
Front. Econ. China. 2008, 3 (2): 209-222.  https://doi.org/10.1007/s11459-008-0009-5
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Chinese excessive liquidity problems are more serious than other main countries. The upgrading industrial structure and the increasing opening degree lead to the excessive money demand and higher money demand elasticity. Bad credits weaken money supply effectiveness and lead to illusive increasing money. We set up the money market disequilibrium model under the condition of the excessive liquidity. The imbalance between money demand and money supply is the key of Chinese excessive liquidity problems.
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A GDP dynamics model and monetary financial policy
LUO Tianyong
Front. Econ. China. 2008, 3 (2): 223-239.  https://doi.org/10.1007/s11459-008-0010-z
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This article applies a dynamics approach in the research of monetary law of movement under the complex system of social economical operation, and characterizes the movement of money in a social institutional framework during GDP’s formation. Assuming that humans’ pursuit of the return of their money expenditure is a sensible course of nature, it defines the expression of money circulation velocity, and proceeds to deduce the basic differential equation of money circulation. By solving this equation, we can get the expression for a GDP dynamics model. After empirically testing the expression, this article draws a conclusion: GDP and the money in circulation (M0) share the positive correlation when the monetary financial institution remains unchanged.
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Dual long memory of inflation and test of the relationship between inflation and inflation uncertainty
LIU Jinquan , ZHENG Tingguo , SUI Jianli
Front. Econ. China. 2008, 3 (2): 240-254.  https://doi.org/10.1007/s11459-008-0011-y
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This paper uses the ARFIMA-FIGARCH model to investigate the China’s monthly inflation rate from January 1983 to October 2005. It is found that both first moment and second moment of inflation have remarkable long memory, indicating the existence of long memory properties in both inflation level and inflation uncertainty. By the Granger-causality test on inflation rate and inflation uncertainty, it is shown that the inflation level affects the inflation uncertainty and so supports Friedman hypothesis. Therefore, as for policy maker, they should roundly concerns on long memory properties of inflation and inflation uncertainty, and their single-direction relationship between them.
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The distributional effects of public pension reform in urban China
HE Lixin
Front. Econ. China. 2008, 3 (2): 255-276.  https://doi.org/10.1007/s11459-008-0012-x
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Using the micro data of Urban Household Survey made by the National Bureau of Statistics of China(NBS) in 2002, this paper studies quantitatively the distributional effects of Public Pension Reform in urban China, from intragenerational and intergenerational perspectives, by measuring lifetime net benefits that urban employees obtain under the public pension system in 1997 and the newest one announced in December 2005, respectively. The results indicate that the regressive income transfer existing before implementation of the reform is improved as a consequence of the 1997 reform. However, the Act of 2005 Reform generates the obvious inclination of the regressive income transfer among people who exceed 40 years old in 2002. On the other hand, from the viewpoint of intergenerational distribution, the intergenerational inequality resulted from 1997 reform is greater than that from 2005 reform. Moreover, all generations would receive higher lifetime net benefits under the Act of 2005 Reform, but it must be based on sustainable pension system and participants’ full pension contribution during their duration of employment.
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Metropolitan economic growth and spatial dependence: Evidence from a panel of China
LI Pei
Front. Econ. China. 2008, 3 (2): 277-295.  https://doi.org/10.1007/s11459-008-0013-9
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There are a number of theoretical reasons why cities interact with each other. Such spatial interdependence has been largely ignored by the empirical literature with only a couple of recent papers accounting for such issues in their estimation. This paper takes spatial dependence panel data models in specifying and testing to analyze three metropolitan growth behaviors in China. We find that controlling for fixed-effects allows us to disentangle the effect of spatial dependence from that of spatial heterogeneity and that of omitted variables. The estimated relationships of traditional determinants of urbanization are robust to inclusion of terms to capture spatial interdependence, even though such interdependence is estimated to be significant. Additionally, the three metropolitan areas might be said to represent three distinct stages during the urbanization of China.
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The investment of human capital of peasant household and the growth of farmers’ income
GUO Zhiyi , CHANG Ye
Front. Econ. China. 2008, 3 (2): 296-311.  https://doi.org/10.1007/s11459-008-0014-8
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Based on an analysis of some theories, this paper studies the relationships among rural household investments and their interaction with farmer income increase empirically by the data of 1983-2005. The findings are: (1) Health investment makes against the growth of farmer, human capital investments for other types, besides, it can not satisfy the needs of farmer. (2) Although migration investment is useful to the growth of farmer income, education and health investment, its effects is time lagged. (3) Education investment has the biggest effects on the growth of farmer income; besides, it also reduces the cost of migration. However, this reduction is a bit small. Finally, some brief suggestions are put forward based on the analysis.
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