Working Paper

Population Aging, Credit Market Frictions, and Chinese Economic Growth

Abstract: We build a unified framework to quantitatively examine population aging and credit market frictions in contributing to Chinese economic growth between 1977 and 2014. We find that demographic changes together with endogenous human capital accumulation account for a large part of the rise in per capita output growth, especially after 2007, as well as some of the rise in savings. Credit pol-icy changes initially alleviate the capital misallocation between private and public firms and lead to significant increases in both savings and output growth. Later, they distort capital allocation. While contributing to further increase in savings, the distortion slows down economic growth. Among factors that we consider, increased life expectancy and financial development in the form of reduced inter-mediation cost are the most important in driving the dynamics of savings and growth.

Keywords: Aging; Credit policy; Household saving; Output growth; China;

JEL Classification: E21; J11; J13; L52;

https://doi.org/10.21799/frbp.wp.2019.55

Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Working Papers

Publication Date: 2019-12-20

Number: 19-55

Pages: 49