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Deflationary Expansion : an Overshooting Perspective to the Recent Business Cycle in China

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  • Gang Gong

    (China Center for Economic Research)

  • Justin Yifu Lin

Abstract

Deflationary expansion has puzzled economists both in and outside China. We study this business cycles phenomenon within a model of discrete time dynamics. We find that deflationary expansion could be possible if driven by an overshooting in investing and if the state of the economy maintains high rate of growth. This expression is consistent with the recent variables. The high steady state of growth could be explained by the current institutional environment of China.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number 21959.

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Date of creation: Jan 2005
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Handle: RePEc:eab:macroe:21959

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Keywords: Deflationary Expansion; China; Existence and Stability Conditions of Equilibrium; Business Fluctuations; monetary policy; Central Banking; Supply of Money and Credit;

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  1. Barro, Robert J. & Sala-i-Martin, Xavier, 1992. "Convergence," Scholarly Articles, Harvard University Department of Economics 3451299, Harvard University Department of Economics.
  2. Barro, R.J. & Sala-I-Martin, X., 1991. "Convergence Across States and Regions," Papers, Yale - Economic Growth Center 629, Yale - Economic Growth Center.
  3. Loren Brandt & Xiaodong Zhu, 2000. "Redistribution in a Decentralized Economy: Growth and Inflation in China under Reform," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(2), pages 422-451, April.
  4. Brandt, Loren & Zhu, Xiaodong, 2001. "Soft budget constraint and inflation cycles: a positive model of the macro-dynamics in China during transition," Journal of Development Economics, Elsevier, Elsevier, vol. 64(2), pages 437-457, April.
  5. Ray C. Fair, 2000. "Testing the NAIRU Model for the United States," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 82(1), pages 64-71, February.
  6. Peter Flaschel & Gang Gong & Willi Semmler, 1998. "A Keynesian Based Econometric Framework for Studying Monetary Policy Rules," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization., Schwartz Center for Economic Policy Analysis (SCEPA), The New School 1998-04, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  7. Michael D. Bordo & John Landon Lane & Angela Redish, 2004. "Good versus Bad Deflation: Lessons from the Gold Standard Era," NBER Working Papers, National Bureau of Economic Research, Inc 10329, National Bureau of Economic Research, Inc.
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Cited by:
  1. James Laurenceson & Corrine Dobson, . "China’s business cycles since 1979: a chronology and comparative analysis," EAERG Discussion Paper Series, School of Economics, University of Queensland, Australia 1705, School of Economics, University of Queensland, Australia.
  2. He, Qing & Tai-Leung Chong, Terence & Shi, Kang, 2009. "What accounts for Chinese Business Cycle?," China Economic Review, Elsevier, Elsevier, vol. 20(4), pages 650-661, December.
  3. Sai Ding & Alessandra Guariglia & John Knight, 2010. "Does China overinvest? Evidence from a panel of Chinese firms," Working Papers, Business School - Economics, University of Glasgow 2010_32, Business School - Economics, University of Glasgow.
  4. Gang Gong & Jian Gao, 2008. "Monetary policy under fixed exchange regime: A study on the future monetary policy in China," Psychometrika, Springer, Springer, vol. 3(2), pages 169-208, June.
  5. Chen, Shiyi & Jefferson, Gary H. & Zhang, Jun, 2011. "Structural change, productivity growth and industrial transformation in China," China Economic Review, Elsevier, Elsevier, vol. 22(1), pages 133-150, March.
  6. Chen, Yen-Hsiao & Quan, Lianfeng & Liu, Yang, 2013. "An empirical investigation on the temporal properties of China's GDP," China Economic Review, Elsevier, Elsevier, vol. 27(C), pages 69-81.
  7. Wei Chi & Richard B. Freeman & Hongbin Li, 2012. "Adjusting to Really Big Changes: The Labor Market in China, 1989-2009," NBER Working Papers, National Bureau of Economic Research, Inc 17721, National Bureau of Economic Research, Inc.
  8. Li, Cheng, 2010. "Government Size and Macroeconomic Stability: Sub-National Evidence from China," MPRA Paper, University Library of Munich, Germany 28226, University Library of Munich, Germany.
  9. Yuanyan Sophia Zhang, 2011. "Credit Market Imperfection and Sectoral Asymmetry of Chinese Business Cycle," IMF Working Papers, International Monetary Fund 11/118, International Monetary Fund.

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