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What accounts for Chinese Business Cycle?

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  • He, Qing
  • Tai-Leung Chong, Terence
  • Shi, Kang

Abstract

This paper investigates the sources of economic fluctuations in China since its reform that started in 1978. Using the framework of a standard neoclassical open economy model with time-varying frictions (wedge), we study the relative contribution of the efficiency, labor, investment and foreign debt wedges to the business cycles of China. The business accounting procedure suggests that productivity best explains the behavior of aggregate economic variables in China throughout the period of 1978-2006. The labor wedge plays a major role in explaining the movement of labor force. The foreign debt wedge and investment wedge primarily affect the composition of output, but their role in explaining the movement of output is modest. Our results suggest that the focus of government policies should be to combat the problems of inefficient factor utilization and labor market rigidity.

Suggested Citation

  • He, Qing & Tai-Leung Chong, Terence & Shi, Kang, 2009. "What accounts for Chinese Business Cycle?," China Economic Review, Elsevier, vol. 20(4), pages 650-661, December.
  • Handle: RePEc:eee:chieco:v:20:y:2009:i:4:p:650-661
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Chen, Yen-Hsiao & Quan, Lianfeng & Liu, Yang, 2013. "An empirical investigation on the temporal properties of China's GDP," China Economic Review, Elsevier, vol. 27(C), pages 69-81.
    2. Du, Julan & He, Qing & Rui, Oliver M., 2011. "Channels of Interprovincial Consumption Risk Sharing in the People’s Republic of China," ADBI Working Papers 334, Asian Development Bank Institute.
    3. Du, Julan & He, Qing & Rui, Oliver M., 2011. "Channels of interprovincial risk sharing in China," Journal of Comparative Economics, Elsevier, vol. 39(3), pages 383-405, September.
    4. He, Qing & Leung, Pak-Ho & Chong, Terence Tai-Leung, 2013. "Factor-augmented VAR analysis of the monetary policy in China," China Economic Review, Elsevier, vol. 25(C), pages 88-104.
    5. He, Qing & Chen, Haiqiang, 2014. "Recent macroeconomic stability in China," China Economic Review, Elsevier, vol. 30(C), pages 505-519.
    6. Chong, Terence Tai-Leung & Lam, Tau-Hing & Yan, Isabel Kit-Ming, 2012. "Is the Chinese stock market really inefficient?," China Economic Review, Elsevier, vol. 23(1), pages 122-137.
    7. Suparna Chakraborty & Keisuke Otsu, 2012. "Deconstructing Growth - A Business Cycle Accounting Approach with application to BRICs," Studies in Economics 1212, School of Economics, University of Kent.
    8. Diao, Xinshen & Zhang, Yumei & Chen, Kevin Z., 2012. "The global recession and China's stimulus package: A general equilibrium assessment of country level impacts," China Economic Review, Elsevier, vol. 23(1), pages 1-17.
    9. Zhao, Min & Hsu, Minchung, 2012. "China's economic fluctuations and consumption smoothing: Is consumption more volatile than output in China?," China Economic Review, Elsevier, vol. 23(4), pages 918-927.
    10. Laurenceson, James & Rodgers, Danielle, 2010. "China's macroeconomic volatility -- How important is the business cycle?," China Economic Review, Elsevier, vol. 21(2), pages 324-333, June.
    11. Ma, Yong, 2016. "Nonlinear monetary policy and macroeconomic stabilization in emerging market economies: Evidence from China," Economic Systems, Elsevier, vol. 40(3), pages 461-480.
    12. Yichao Liu & Sunwei Li & Qian Yi & Daoyi Chen, 2017. "Wind Profiles and Wave Spectra for Potential Wind Farms in South China Sea. Part II: Wave Spectrum Model," Energies, MDPI, Open Access Journal, vol. 10(1), pages 1-24, January.

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