Business Cycles, Consumption and Risk-Sharing: How Different Is China?
AbstractCan standard business-cycle methodology be applied to China? In this chapter, we address this question by examining the macroeconomic time series and identifying dimensions in which China differs from economies (such as Canada and the U.S.) that are typically the subject of business-cycle research. We show that naively applying the standard business-cycle tools to China is no more ridiculous than applying it to Canada, although the dimensions along which the model struggles is different. For China, the model cannot account for the low level of consumption (or high saving) as a proportion of income observed in the data. An examination of provincial level consumption data suggests that the absence of channels for intranational consumption risk sharing may be an important reason why the business-cycle model has trouble accounting for Chinese consumption and saving behavior.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16154.
Date of creation: Jul 2010
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Publication status: published as Business Cycles, Consumption and Risk-Sharing: How Different is China” (with C. Curtis), in Yin-Wong Cheung, Vikas Kakkar, and Guonan Ma, eds., The Evolving Role of Asia in Global Finance, forthcoming.
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Find related papers by JEL classification:
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-10 (All new papers)
- NEP-BEC-2010-07-10 (Business Economics)
- NEP-CBA-2010-07-10 (Central Banking)
- NEP-CNA-2010-07-10 (China)
- NEP-DEV-2010-07-10 (Development)
- NEP-DGE-2010-07-10 (Dynamic General Equilibrium)
- NEP-MAC-2010-07-10 (Macroeconomics)
- NEP-TRA-2010-07-10 (Transition Economics)
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