This paper presents a new explanation of why the growth effect of inflation reported in the literature is an inverted-U relationship with considerations of lower bound on bank lending rates. We integrate a non-zero lower bound on the lending rate in the discussion and show the effect of inflation on optimal bank loan contracts. This paper believes that informational friction is a source of the negative relationship between inflation and growth when the loan rate constraint is non-binding. Besides, it finds out that once this loan rate constraint is binding, increasing inflation can reduce the real cost of financing capital investment and then contribute to growth. This paper also proves that the non-zero lower limit can only be reached at the low rate of inflation. It implies developing countries that are more likely to have low capital conversion efficiency and high transaction cost would hold a higher inflation-growth nexus than developed countries.
This study seeks to explore the strategic alternatives for the many small and medium-sized manufacturing firms in China that play an OEM role in the global value chain. Declining margins due to rising production costs and intense competition from emerging manufacturing industries in Southeast Asia necessitates the transformation of China's traditional manufacturing industry. The result is opportunities for the creation and manufacturing of domestic brands. A multiple-case study methodology is used with primary data collection through in-depth interviews, supported by secondary data on the subject firms. The findings reveal an awareness of the opportunities afforded by the trend towards the development of domestic brands as well as the vision, strategy, tactics, and forecasting related to a transition to brand creation. This chapter could be of interest to those with an interest in manufacturing transition, brand development, and providing direction to OEM SMEs in China that seek to develop a strategic roadmap during the imminent industrial evolution and transformation.
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