Optimal borrowing constraints and growth in a small open economy

• 成果类型: Article
• 署名作者: Michaud, Amanda; Rothert, Jacek
• 署名单位: Indiana University System; Indiana University Bloomington; United States Department of Defense; United States Navy; United States Naval Academy
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2014.07.001
• 发表日期: 2014
• 页码: 326-340
• 关键词: Learning-by-doing; borrowing constraints; Chinese economy; capital controls

摘要

Chinese high growth has been accompanied by government restrictions on international borrowing (capital controls). In this paper, we ask: are such restrictions a useful policy tool to facilitate growth? We provide a theory of borrowing constraints on households as a tool to correct a learning-by-doing externality. Borrowing constraints operate as a policy tool through two channels: (i) increasing labor supply and (ii) reallocating labor towards traded goods. We find that welfare gains are closest to that of the First-Best Planner allocation when the externality is not too large. We compute the sequence of optimal constraints along the growth path and show how the use of this policy tool contributes to repressed wages, current account balance, and slow real exchange rate appreciation. Published by Elsevier B.V.