The Effects of Changes of Policy Tool during the Transition Period in China
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One aspect of the transition from a planned economy to a market economy can be seen in changes in how firms finance themselves. In a planned economy, the central government distributes funds, while in a market economy, funds are acquired through banks or other financial mechanisms. In terms of policy tools, with the transition, the government loses some of the policy effects of government expenditures on national output, while it gains control of a new economic policy tool – monetary policy.
KeywordsMonetary Policy Central Bank Granger Causality Government Expenditure Money Supply
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