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Sources Of Business Cycle Fluctuations: Comparing China And India

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  • Ljungwall, Christer

    ()
    (China Economic Research Center)

  • Gao, Xu

    (World Bank, China Group, Beijing Office)

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    Abstract

    This paper investigates the sources of business cycle fluctuations in China and India since 1978/81. Under the framework of a standard neoclassical open economy model with time-varying frictions (wedges), we study the relative importance of efficiency, labor, investment and government consumption wedges on the business cycle phenomenon. This enables us to contrast and compare the two countries’ experience in a way remarkably different from previous studies. The results for both China and India show that efficiency wedge is the main source of economic fluctuations, while the investment wedge and government consumption wedge played minor roles in generating business cycles.

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    File URL: http://swopec.hhs.se/hacerc/papers/hacerc2009-007.pdf
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    Bibliographic Info

    Paper provided by China Economic Research Center, Stockholm School of Economics in its series Working Paper Series with number 2009-7.

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    Length: 23 pages
    Date of creation: 01 May 2009
    Date of revision:
    Handle: RePEc:hhs:hacerc:2009-007

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    Postal: China, Economic Research Center, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
    Phone: +46-8-736 90 00
    Fax: +46-8-31 81 86
    Web page: http://www.hhs.se/CERC/
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    Keywords: Business cycle fluctuations; Business cycle accounting; China; India;

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    References

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    1. Kobayashi, Keiichiro & Inaba, Masaru, 2006. "Business cycle accounting for the Japanese economy," Japan and the World Economy, Elsevier, vol. 18(4), pages 418-440, December.
    2. Charles T. Carlstrom & Timothy S. Fuerst, 1996. "Agency costs, net worth, and business fluctuations: a computable general equilibrium analysis," Working Paper 9602, Federal Reserve Bank of Cleveland.
    3. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-11, July.
    4. Kochhar, Kalpana & Kumar, Utsav & Rajan, Raghuram & Subramanian, Arvind & Tokatlidis, Ioannis, 2006. "India's pattern of development: What happened, what follows?," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 981-1019, July.
    5. Tiago Cavalcanti, 2007. "Business cycle and level accounting: the case of Portugal," Portuguese Economic Journal, Springer, vol. 6(1), pages 47-64, April.
    6. Casey B. Mulligan, 2002. "A Dual Method of Empirically Evaluating Dynamic Competitive Equilibrium Models with Market Distortions, Applied to the Great Depression & World War II," NBER Working Papers 8775, National Bureau of Economic Research, Inc.
    7. Arvind Subramanian & Raghuram Rajan & Ioannis Tokatlidis & Kalpana Kochhar & Utsav Kumar, 2006. "India's Pattern of Development," IMF Working Papers 06/22, International Monetary Fund.
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    Cited by:
    1. Suparna Chakraborty & Keisuke Otsu, 2012. "Deconstructing Growth - A Business Cycle Accounting Approach with application to BRICs," Studies in Economics 1212, Department of Economics, University of Kent.

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