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China's Business Cycles: Perspectives from an AD-AS Model

  • Yin Zhang
  • Guanghua Wan

The present paper represents a first attempt to study China's business cycles using a formal analytical framework; namely, a structural VAR model. It is found that (i) demand shocks were the dominant source of macroeconomic fluctuations, but supply shocks had gained more importance over time; (ii) driving forces of demand shocks were consumption and fixed investment in the first cycle of 1985-1990, but shifted to fixed investment and world demand in the second cycle of 1991-1996 and the post-1997 deflation period; and (c) macroeconomic policies did not play an important part either in initiating or counteracting cyclical fluctuations. Copyright 2005 East Asian Economic Association.

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Article provided by East Asian Economic Association in its journal Asian Economic Journal.

Volume (Year): 19 (2005)
Issue (Month): 4 (December)
Pages: 445-469

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Handle: RePEc:bla:asiaec:v:19:y:2005:i:4:p:445-469
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