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The Chinese Output Gap During the Reform Period 1978-2002

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  • Jorg Scheibe

Abstract

We estimate potential GDP for China comparing univariate and multivariate methods and derive a quarterly output gap series. For the multivariate, production function based estimates we employ aggregate data and data on five economic subsectors. We estimate production functions in levels as well as an EqCM specification, which we argue is better suited for identifying the long-run share of capital and labour in production. Our output gap estimates improve on earlier work which has so far been used in the emerging literature on macro-modelling of the Chinese economy. Drawing on the literature on Chinese economic growth, productivity measurement, and capital stock construction, we find that across a range of reasonable assumptions for capital and labour data specifications the output gap estimates remain correlated and robust. All our methods show that at the end of 2002 China is entering a period of economic upswing, but the current level of the output gap is much below the previous peaks in 1988/9 and 1994/5.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 179.

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Date of creation: 01 Dec 2003
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Handle: RePEc:oxf:wpaper:179

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Related research

Keywords: output gap; growth regressions; EqCM specification of production function; Chinese capital stock data;

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References

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Cited by:
  1. Joerg Scheibe & David Vines, 2005. "A Phillips Curve For China," CAMA Working Papers 2005-02, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Zhang, Chengsi & Murasawa, Yasutomo, 2012. "Multivariate model-based gap measures and a new Phillips curve for China," China Economic Review, Elsevier, vol. 23(1), pages 60-70.
  3. Tara M. Sinclair, 2012. "Characteristics and Implications of Chinese Macroeconomic Data Revisions," Working Papers 2012-09, The George Washington University, Institute for International Economic Policy.

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