Sep 2009, Volume 4 Issue 3
    

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  • Research articles
    CPI vs. PPI: Which drives which？
    2009, 4(3): 317-334. https://doi.org/10.1007/s11459-009-0018-z
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    The consumer price index (CPI) and producer price index (PPI) are interrelated but significantly different concepts. Relationships between the two indices may be that of causality or non-causality. The paper conducts a Granger-causality test on China’s CPI and PPI data for the period from January 2001 to August 2008, and finds that CPI Granger causes the change in PPI, and the latter reacts to the former with a time lag of 1–3 months. The result may suggest that in contemporary Chinese economy, demand-side factors have played a more important role than supply-side factors, although the two sides both have influences on domestic inflation trend which is measured by CPI.
  • Research articles
    The binary transmission mechanism of China’s monetary policy—A research on the “two intermediaries, two targets” model
    2009, 4(3): 335-360. https://doi.org/10.1007/s11459-009-0019-y
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    The research, using VAR model and economic and financial data starting from January 1998 and expiring by June 2006, by econometric methods and theoretical analysis, examines the intermediate target and transmission channel of China’s monetary policy. The results are as followings: (1) Monetary supply M2 is a good indicator for China’s monetary policy, its prediction ability to economic variables is far above other monetary variables; (2) M2 is China’s monetary intermediate target because M2 reacts systematically to the industrial added value and CPI, and M2 innovation is made by the People’s Bank of China (PBC); (3) Monetary transmission channel does not exist in China basically, the main transmission channel is bank loans, credit quota is a de facto intermediate target, which regulates macroeconomy directly and induces the changes in M2, so there are two intermediate targets—credit quota and M2, which is fundamentally the same as the situation before 1998; (4) The two intermediate targets function in different fields—credit quota for real economy and M2 for the financial market, which is a realistic choice and PBC has successfully coordinated them. These conclusions are meaningful for the practices of China’s monetary policy, which indicates that we should pay more attention to the credit quota and take it as the core variable to regulate macroeconomy. Of course, this monetary transmission mode is only effective temporarily because there are many limitations in it. In the future, it is necessary to adopt the interest rate, which is more informative, SHENG Songcheng, WU Peixin 336 as the intermediate target, which takes the marketization of the interest rate and exchange rate as the preconditions.
  • Research articles
    Reserve requirement, reserve requirement tax and money control in China: 1984–2007
    2009, 4(3): 361-383. https://doi.org/10.1007/s11459-009-0020-5
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    In recent years, the People’s Bank of China (PBC) has carried out monetary policy by means of reserve requirement frequently in an effort to hedge the excess liquidity in the banking system. But just like other government taxes, reserve requirement maybe have an optimal required reserve rate (RRR). When the RRR have been raised to the optimal level, the effect of reserve requirement policy in money control and liquidity sterilization should also be withered due to the loss of the “tax base”. Therefore, we establish a theoretical model and analysis framework and make the corresponding econometric test and empirical analysis. The main conclusions are as follows: The optimal RRR in China at present is about 23%. If the RRR is further raised above 23%, the monetary authority should adjust the deposit and loan interest rates, interest margins between deposits and loans and the deposit reserve requirement rate to expand the using scope of the reserve requirement policy.
  • Research articles
    Financial constraints, agency cost and firm’s investment behavior: Evidence from listed companies of China
    2009, 4(3): 384-405. https://doi.org/10.1007/s11459-009-0021-4
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    Financial constraints due to the imperfection of capital market have been emphasized as an important factors determining investment by researchers recently. Beside of which, the soft budget constraints (SBC) and agency problem caused by dual property structure of enterprise system are even more important for investment in transitional China. Combing the background of aggregate investment, this paper analyzes the investment behavior and its inner mechanism of listed company in China from different views of SBC, agency cost theory and financial constraints. Based on the empirical study of 1 373 listed company, we find there is indeed some differences for SOE and non-SOE in the aspect of financial constraints even the hypothesis on nexus of cash flow and investment fails. Evidence has been found to support that principal-agency problem in the background of SBC and financial constraints can explain the investment behavior of listed company jointly, which provides another way to interpret the investment behavior of listed company in transitional country.
  • Research articles
    Impact of fiscal transfer on fiscal effort of Chinese provincial governments
    2009, 4(3): 406-424. https://doi.org/10.1007/s11459-009-0022-3
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    An ideal scheme of intergovernmental transfer should be determined by equalization and efficiency with taking account of fiscal effort of local governments. In this regard, this paper provides a comprehensive review of Chinese transfer system since the decentralized taxation system (DTS) starting from 1994. To begin with, we make numerical analysis on equalization in economic and fiscal aspects since the 1994 DTS reform. A Panel Data model is then developed to analyze correlations between each of three types of transfer and fiscal effort of provincial governments based on Chinese experience during 1994–2006. The authors further research respective situation of eastern, middle and western parts of China and finally draw a conclusion through the above analysis that the current fiscal transfer system does not tangibly contribute towards improving fiscal effort devoted by local governments. In addition to that, it even has a somewhat counter-equalizing effect.
  • Research articles
    Government size, market-orientation and regional corruption: Evidence from the provincial level panel data
    2009, 4(3): 425-448. https://doi.org/10.1007/s11459-009-0023-2
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    Using a panel data at the provincial level during the period of 1989–2004, this paper examines the effects of social and economic factors such as government scale, privatization, openness, and education on regional corruption. Applying a fixed-effect model and IV estimation, we find that government size positively affects the incidence rate of corruption, and the effect becomes larger with the increase in the size of the core department of the government. 1% increase in the core department of the government leads to a 0.68%–1% increase in the number of corruption cases. While the proportion of FDI is positively associated with the corruption of regional officials, the ratio of the import and export trade to GDP is negatively associated with corruption. The impact of privatization on corruption is ambiguous. We also identify the significant impacts of the size and structure of the government expenditure on corruption. Keywords corrup
  • Research articles
    Influence of export on innovation activities of domestic enterprises —Intra-industry and inter-industry spillovers
    2009, 4(3): 449-460. https://doi.org/10.1007/s11459-009-0024-1
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    Using the panel data from 2001 to 2003 across manufacturing industries in China, this paper analyzes the intra-industry and inter-industry spillovers from export on the productivity and innovation activities of domestic enterprises in China. Among the industries we investigate and in the sample session, there are evidences of positive backward linkage spillovers to the process innovation of domestic enterprises, and negative backward linkage spillovers to the product innovation activities. Based on the findings, we make some policy suggestions.
  • Research articles
    Split share structure reform effect model and empirical analysis
    2009, 4(3): 461-477. https://doi.org/10.1007/s11459-009-0025-0
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    Based on the sample of 939 Chinese listed companies in the 40 former reformed batches, this paper investigates the effect of Chinese split share structure reform and its impact factors. First, considering Chinese split share structure reform as an event, an effect model is set up by means of the event study method, which takes abnormal return rate as a basic indicator to measure the reform effect. Further, in order to look for the impact factors on the reform effect, the empirical comparing analysis for different batches, different trading posts and different boards are done. These results show that the reform has positive effects on Chinese stock market and increases value of the listed companies. There is higher transformable return rate in the reform batches which include more Chinese listed companies with high quality performances. The shareholders who are in Shenzhen Stock Exchange market get higher transformable return rate than the shareholders who are in Shanghai Stock Exchange market. SME board has higher transformable return rate than the main board.