Financial constraints and orderly financial development

Author: Huang Jingru
Publisher:
Publish Date: 2005-07-01
Features: The imperfections in the financial system have always existed. The market has defects that need intervention to solve, and this has been recognized by countries worldwide, at least in practice. Based on financial development theory, this book thoroughly analyzes the financial constraint theory and proposes the concept of "orderly financial development." Subsequently, it describes various aspects of orderly financial development, combining practices from countries including China, attempting to outline a framework for rational interaction between government and market. The implementation and exit of financial constraint policies require specific conditions, and the gradual exit of constraint policies is a crucial aspect of the financial liberalization process. Besides the introduction, the book is mainly divided into two parts: Part I includes Chapters 1 and 2, and Part II includes Chapters 3 to 7. The book delves into the fiscal and monetary control issues that may arise during the exit process of financial constraint policies, using China as a case study. The book argues that strong fiscal capacity remains crucial for the government. In terms of monetary control, China's indirect regulatory framework has been largely established, but some issues still persist under the conditions of an open economy. These issues mainly manifest as: constrained independence of monetary policy, increased endogeneity of money supply, the absence of effective monetary policy tools, and changes in the transmission mechanism of monetary policy.