Baizhu Chen

Determinants of economic growth in China: Private enterprise, education, and openness

This essay investigates the source of cross-provincial variations of economic growth in China. A statistical analysis of data on 29 provinces, municipalities, and autonomous regions from 1978 through 1989 confirms the findings in the literature of empirical studies of economic growth based upon cross-country empirical analyses, and uncovers some characteristics unique to China. We find that private and semi-private enterprises, higher education and international trade all lead to an increase in economic growth in China. We also find that high fertility, high inflation, and the presence of state-owned enterprises (SOE) reduce growth rates among the provinces. Finally, our evidence indicates that the convergence hypothesis holds in China. D 2000 Elsevier Science Inc. All rights reserved.

Long-Run Money Demand and Inflation in China

Abstract This article reports on the stability of the long-run money demand functions for three definitions of money in China. Using annual data from 1951–1991, I have found that the long-run money demand functions using M0 and M2 exist and are stable throughout the sample period, which includes pre- and post-reform years. Further, it is found that the income elasticities of the real money demands for M0 and M2 are around 1.4–1.5 and 1.8–1.9. The results indicate that to control inflation under 10% in China, the targeted M2 growth rate should not exceed 28–29%.

Long-run purchasing power parity: evidence from some European Monetary System countries

Long-run purchasing power parity (PPP) for five countries participating in the European Monetary System (EMS) during the recent floating exchange rate period is studied. Using new econometric techniques, evidence is found supporting long-run purchasing power parity. Moreover, the long-run PPP relationship is generally stable throughout the period since the dissolution of the Bretton-Woods period, even with the advent of the European Monetary System. Frequent realignments within the EMS may have served to maintain competitiveness between member countries.

Openness and trade policy in China: an industrial analysis

Abstract This paper analyzes the tariff structure and its determinants in China, with our research conducted under the rubric of endogenous policy theory. We study the tariff rates for 95 industries in China in 1996. The potential determinants of tariff rates are collected from an array of variables characterizing industries in 1995. A principal component method is used to reduce these variables into four major dimensions. The first component comprises the information on the composition of employees broken down by age, education, and job classification. The second component is underlined by the profitability of the industry. The third component consists of those variables not picked up with high salience in the first two components. More closely resembling those in the second component than the first, these variables include gross product, foreign capital, inventory, sales revenue, and total loss. The fourth component receives high loadings from two variables: the number of firms in the industry and the number of firms that incur net losses in their operation. Using variables identified by the principal component analysis and postulated by the variants of the endogenous trade theory, regression analysis finds that the trade policy in China is mainly defined by an industrial policy favoring high-tech industries and a social policy minimizing social instability. The implications for Chinas entry into the World Trade Organization (WTO) are also provided in the paper.

Are We Sure That the Real Exchange Rate Follows a Random Walk? A Reexamination

This paper reexamines whether the real exchange rate follows a random walk. We test the null hypothesis of a unit root against the alternative of stationarity and also the null hypothesis of stationarity against the alternative of a unit root. The test proposed by Kwiatkowski. Phillips, Schmidt and Shin (KPSS, 1992) is modified and applied to the monthly and annual data. While our monthly series suggest somewhat mixed results, the results of annual data favor the stationarity hypothesis in our both tests. We conclude that the real exchange rate may have a long mean-reversion component that the conventional unit root tests are not powerful enough to detect in a short span sample. [F31]