Quantifying the Interactions Between the Financial Sector and the Macroeconomy in China: A Structural Approach

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The PIs will carry out data collection work that will shed new light on the Chinese economy as a whole. They will use publicly available detailed information on regular and off-balance-sheet intermediation activities by Chinese banks. From this information, they plan to create a longitudinal data set of economic aggregate measures that can be used to study the Chinese macroeconomy. Understanding China's financial markets and macroeconomy is crucial for the design of U.S. monetary and fiscal policy, with the overall goal of enhancing the competitiveness of the US economy in the global marketplace.The PIs will make their data set publicly available. Their analysis will also employ structural models to study interactions between bank lending activities, macroeconomic policy, and the aggregate economy. Because China's economy has a number of structural differences from advanced economies, the PIs will adapt models used to study the U.S. and Europe to build these structural models. The PIs will also compare the various results of the structural models and use parameters from these models to estimate transitional dynamics in the economy.