Abstract
In this paper we have used a global modelling framework to examine the impacts within China and the rest of the world of major policy reforms in both international trade and financial flows in China. We have found significant gains to China in terms of efficiency gains as well as increasing the ability to bring forward expected future income rises through access to global capital markets. Associated with each reform simulated is a large movement in financial prices, especially exchange rates which play an important role in the adjustment process. These results demonstrate that financial fluctuations are an important element of the adjustment process which need to be understood by policymakers. The greater integration of global capital markets changes the nature of the adjustment process to economic reform in emerging economies that tends to be captured in standard CGE models of trade reform. A better understanding of this adjustment process is essential if global capital is to be used to enhance the reform process rather than to de-rail it by policy mistakes.
Original language | English |
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Pages (from-to) | 979-1003 |
Number of pages | 25 |
Journal | World Economy |
Volume | 23 |
Issue number | 8 |
DOIs | |
Publication status | Published - 2000 |