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Author:Zhang, Jingyi 

Working Paper
Optimal Capital Account Liberalization in China

China maintains tight controls over its capital account. Its prevailing regime also features financial repression, under which banks are often required to extend a fraction of funds to state-owned enterprises (SOEs) at below-market interest rates. We incorporate these features into a general equilibrium model. We find that capital account liberalization under financial repression incurs a tradeoff between aggregate productivity and intertemporal allocative efficiency. Along a transition path with a declining SOE share, the second-best policy calls for a rapid removal of financial repression, ...
Working Paper Series , Paper 2018-10

Working Paper
Reserve Requirements and Optimal Chinese Stabilization Policy

We build a two-sector DSGE model of the Chinese economy to study the role of reserve requirement policy for capital reallocation and business cycle stabilization. In the model, state-owned enterprises (SOEs) have lower average productivity than private firms, but they have superior access to bank loans because of government guarantees. Private firms rely on ?shadow? bank financing. Commercial banks are subject to reserve requirement regulations but shadow banks are not. Our framework implies a tradeoff for reserve requirement policy: Increasing the required reserve ratio acts as a tax on SOE ...
Working Paper Series , Paper 2016-10

Working Paper
Capital Controls and Income Inequality

We examine the distributional implications of capital account policy in a small open economy model with heterogeneous agents and financial frictions. Households save through deposits in both domestic and foreign banks. Entrepreneurs finance investment with borrowed funds from domestic banks and foreign investors. Domestic banks engage in costly intermediation of deposits from households and loans to entrepreneurs. Government capital account policy consists of taxes on outflows and inflows. Given policy, a temporary decline in the world interest rate leads to a surge in inflows, benefiting ...
Working Paper Series , Paper 2020-14

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