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Deepening supply-side structural reform is the main objective of the economic work since the Chinese economy entered a new stage of development. By adopting the fundamental principles and methodologies of Marxist political economy, the authors can provide clarifications on the three basic theoretical issues concerning the supply-side structural reform. The paper aims to discuss these issues.

First, the essential starting point for understanding the supply-side structural reform is the primacy of production, as well as the organic connection between production and consumption in social reproduction, rather than the supply and demand as superficially seen in exchanges. By identifying the right starting point, the authors can avoid alternating between demand and supply management, and between liberalism and interventionism.

Structural problems, which are closely related to the institutional structure of production and the purpose and nature of production, cannot be solely attributed to the imbalance caused by market failures. Chinese economy has suffered prolonged structural contradictions and structural problems.

To decide whether the financial and the real estate sectors are real economy or virtual economy, the key is to examine whether the monetary capital used in financial activities and real estate commodity (capital) go through the capital circulation process of from monetary capital to productive capital and further to commodity capital, and whether the capital gain is generated by the value appreciation of capital or the value transfer and distribution as a result of the transfer of ownership. With its emphasis on developing the real economy, the supply-side structural reform should foster both development of manufacturing, and parts of financial and real estate sectors that are the real economy.

The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II. Globalization, liberalization, integration, and transition processes generally shaped the crucial milestones of the macroeconomic development and substantial features of economic policy and its framework in Europe. Policy-driven changes together with variety of exogenous shocks significantly affected the key features of macroeconomic environment on the European continent that fashioned the framework and design of monetary policies.

This chapter examines the key basis of the central bank’s monetary policy on its way to pursue and preserve the internal and external stability of the purchasing power of money. Substantial elements of the monetary policy like objectives and strategies are not only generally introduced but also critically discussed according to their accuracy, suitability, and reliability in the changing macroeconomic conditions. Brief overview of the Eurozone common monetary policy milestones and the past Eastern bloc countries’ experience with a variety of exchange rate regimes provides interesting empirical evidence on origins and implications of vital changes in the monetary policy conduction in Europe and the Eurozone.

The purpose of this paper is to examine the impact of real exchange rate misalignment on economy and economic sectors, namely construction, manufacturing and mining and quarrying in Malaysia.

The equilibrium real exchange rate and economic models are estimated using the autoregressive distributed lag approach.

An increase in productivity differential or reserve differential will lead to an appreciation of real exchange rate in the long run. An increase in positive (negative) real exchange rate misalignment will lead to an increase (decrease) in economy. An increase in long-run real exchange rate misalignment will lead to a decrease in economy. Real exchange rate misalignment or long-run real exchange rate misalignment can influence the manufacturing sector in Malaysia. More specifically, undervaluation will promote whereas overvaluation will hurt the manufacturing sector.

Real exchange rate misalignment can be a policy to influence economy but may not be the best choice.

This chapter discusses the contradictory role and place of finance within the post-1980 US economy. A central argument advanced is that the relationship between the real and financial sides of the economy has become increasingly more complicated and contradictory. Therefore, the distinction made between “real” and “financial” problems of the economy needs to be better qualified by taking into account the dynamics between the two. The contradictory relationship is analyzed through a discussion of finance in relation to labor and households, nonfinancial corporations, speculative asset bubbles, and global imbalances. This analysis shows that finance has been in a contradictory unity with the rest of the economy. It has contributed to some of the problems in the economy, while providing solutions to them at other instances and in the process it shaped and in turn was shaped by the rest of the economy.

The construction of a modern economic system is a symbolic and strategic choice for large developing economies on the path toward high-quality economic development. The paper aims to discuss this issue.

The overall framework aims to adhere to “One Policy and One Mainline” to build an innovation-driven, synergistic industrial system and a “with three-qualities” economic system (with efficient market mechanisms, energetic micro-agents and appropriate macroeconomic regulation).

The strengthening of the real economy and construction of a modern industrial system constitute the material basis for supporting this system and framework. As major decision making and theoretical innovation in empirical practice, building a modern economic system can also contribute substantially toward developing the applied economic theory of socialism with Chinese characteristics.

Building a modern economic system in China necessitates, without exception, the construction of various subsystems encompassing industrial, market, distribution, regional development, green development, open and economic institutional aspects.

Nobody concerned with political economy can neglect the history of economic doctrines. Structural changes in the economy and society influence economic thinking and, conversely, innovative thought structures and attitudes have almost always forced economic institutions and modes of behaviour to adjust. We learn from the history of economic doctrines how a particular theory emerged and whether, and in which environment, it could take root. We can see how a school evolves out of a common methodological perception and similar techniques of analysis, and how it has to establish itself. The interaction between unresolved problems on the one hand, and the search for better solutions or explanations on the other, leads to a change in paradigma and to the formation of new lines of reasoning. As long as the real world is subject to progress and change scientific search for explanation must out of necessity continue.

The purpose of this paper is to calculate the bank efficiency of removing potential risks that are hidden from the extreme portfolio of bank’s assets and further compare the differences and causes of bank’s efficiency and potential risk level between China’s representative banks and OECD representative banks in 2011-2015.

Based on the weight-limited DEA model, this paper calculates the bank’s efficiency and further compares the differences between China’s representative banks and OECD representative banks by using commercial banks’ transnational data.

By analyzing US representative banks’ data, the authors find that the excessive expansion of the scale of banks’ investment for the non-real economy shrinks after the bubble burst and would not improve the efficiency of banks immediately. The OECD representative banks rather prefer to extreme asset portfolio so that the potential risks gradually increase, while there is a diminishing effect on investments in non-real economies to improve bank efficiency. On the other hand, China’s representative banks have the signs of reducing investment in the real estate market, but the existence of the bubble in the market led to a lagged effect on the impact of adjustment of bank asset portfolio on efficiency.

This paper has practical significance for commercial banks to improve efficiency and reduce credit risks. This is conducive to the implementation of targeted supervision by the banking supervision department.

Based on the lesson that the financial crisis created by the real estate bubble burst in the USA in 2008 and the financial market active guidance of the developed economies, faced with the reality of Chinese real estate market bubble rising and the continuous improvement of Chinese financial market, this paper compares the differences between representative banks in China and OECD, and explores the causes by using the cross-country data of commercial banks.

By adjusting the weight of the input variables in the efficiency measurement, quantifying the risk is often overlooked by the changes in bank efficiency. This potential risk is caused by the bank’s investment preferences in the non-real economy represented by real estate and tradable financial assets.

This paper inquires into the root causes of global imbalances from an international trade perspective. The purpose of the paper is to establish a conceptual framework that links financial market governance, international trade and financial market integration, and to derive implications for the global financial crisis.

In order to analyze global imbalances, the paper draws on a theoretical Heckscher‐Ohlin‐Samuelson international trade model, in which it compares two open economies, solely differing in their financial market governance structures. Building on these findings, the paper extends the analysis to the role of financial market frictions in propagating global imbalances into excessive lending in high‐income economies.

To that extent, it argues that global imbalances are due to impasses in international production. This paper argues that countries seeking to suppress real appreciation have engaged in financial repression, which has, via financial globalization, translated into excessive expansion of financial service sectors in flexible market economies.

In order to derive a tractable framework, the abstract from inter‐temporal aspects and from an in‐depth analysis of financial modelling issues. Owing to the static nature of the set‐up, the analytic link between global imbalances and the global financial crisis is intuitive.

Given that differences in national financial market governance influence the direction of international capital and trade flows, it argues for more international policy coordination in preventing future crisis.

The unique feature of the contribution is that it links financial market governance and international trade to international financial market integration in a tractable theoretical framework.