We show that the many unusual features of China's financial markets are consistent with a government choosing regulations to maximize a standard type of social welfare function. Under certain conditions, these regulations are equivalent to imposing explicit taxes on business and interest income,...

We develop a model of dealer-intermediated over-the-counter (OTC) markets in which customers choose their relationship dealers and dealers choose their levels of expertise, thereby determining the market structure and price informativeness jointly. We find that, in general, multiple equilibria...

To date, China has maintained a variety of restrictions on its financial markets. In addition to imposing capital controls and regulating interest rates, the government controls both the set of firms that can sell equity on the domestic or foreign stock markets, and the amount they can sell....

To date, China has maintained a variety of restrictions on its financial markets. In addition to imposing capital controls and regulating interest rates, the government controls both the set of firms that can sell equity on the domestic or foreign stock markets, and the amount they can sell....

We show that the many unusual features of China's financial markets are consistent with a government choosing regulations to maximize a standard type of social welfare function. Under certain conditions, these regulations are equivalent to imposing explicit taxes on business and interest income,...