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HOUSEHOLD SAVING, FINANCIAL CONSTRAINTS, AND THE CURRENT ACCOUNT IN CHINA
Author(s) -
İmrohoroğlu Ayşe,
Zhao Kai
Publication year - 2020
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12417
Subject(s) - current account , economics , china , government (linguistics) , balance (ability) , monetary economics , exchange rate , medicine , linguistics , philosophy , law , political science , physical medicine and rehabilitation
Abstract In this article, we present a model that can account for the changes in the current account balance in China since the 2000s. Our results suggest that inadequate insurance through government programs for the elderly and the decline in family insurance due to the one‐child policy led to large increases in the household saving rate. These increases coupled with the financial frictions preventing the household saving from being invested in domestic firms resulted in large current account surpluses until 2008. Relaxation of financial constraints, on the other hand, was responsible for the decline in the current account surplus after 2008.