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Deflationary Expansion : an Overshooting Perspective to the Recent Business Cycle in China

Author

Listed:
  • Gang Gong

    (China Center for Economic Research)

  • Justin Yifu Lin

Abstract

Deflationary expansion has puzzled economists both in and outside China. We study this business cycles phenomenon within a model of discrete time dynamics. We find that deflationary expansion could be possible if driven by an overshooting in investing and if the state of the economy maintains high rate of growth. This expression is consistent with the recent variables. The high steady state of growth could be explained by the current institutional environment of China.

Suggested Citation

  • Gang Gong & Justin Yifu Lin, 2005. "Deflationary Expansion : an Overshooting Perspective to the Recent Business Cycle in China," Macroeconomics Working Papers 21959, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:macroe:21959
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    References listed on IDEAS

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    1. Brandt, Loren & Zhu, Xiaodong, 2001. "Soft budget constraint and inflation cycles: a positive model of the macro-dynamics in China during transition," Journal of Development Economics, Elsevier, vol. 64(2), pages 437-457, April.
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    3. Michael D. Bordo & John Landon Lane & Angela Redish, 2004. "Good versus Bad Deflation: Lessons from the Gold Standard Era," NBER Working Papers 10329, National Bureau of Economic Research, Inc.
    4. Loren Brandt & Xiaodong Zhu, 2000. "Redistribution in a Decentralized Economy: Growth and Inflation in China under Reform," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 422-451, April.
    5. Ray C. Fair, 2000. "Testing the NAIRU Model for the United States," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 64-71, February.
    6. Peter Flaschel & Gang Gong & Willi Semmler, 1998. "A Keynesian Based Econometric Framework for Studying Monetary Policy Rules," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 1998-04, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
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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. Sai Ding & Alessandra Guariglia & John Knight, "undated". "Does China overinvest? Evidence from a panel of Chinese firms," Discussion Papers 12/04, University of Nottingham, GEP.
    3. Chen, Shiyi & Jefferson, Gary H. & Zhang, Jun, 2011. "Structural change, productivity growth and industrial transformation in China," China Economic Review, Elsevier, vol. 22(1), pages 133-150, March.
    4. Gang Gong & Jian Gao, 2008. "Monetary policy under fixed exchange regime: A study on the future monetary policy in China," Psychometrika, Springer;The Psychometric Society, vol. 3(2), pages 169-208, June.
    5. repec:spr:chfecr:v:4:y:2016:i:1:d:10.1186_s40589-016-0027-x is not listed on IDEAS
    6. Yuanyan S Zhang, 2011. "Credit Market Imperfection and Sectoral Asymmetry of Chinese Business Cycle," IMF Working Papers 11/118, International Monetary Fund.
    7. Wei Chi & Richard Freeman & Hongbin Li, 2012. "Adjusting to Really Big Changes: The labor Market in China, 1989-2009," Working Paper 446386, Harvard University OpenScholar.
    8. 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.
    9. Gong, Gang, 2016. "Two Stages of Economic Development," ADBI Working Papers 628, Asian Development Bank Institute.
    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. James Laurenceson & Corrine Dobson, "undated". "China’s business cycles since 1979: a chronology and comparative analysis," EAERG Discussion Paper Series 1705, School of Economics, University of Queensland, Australia.
    12. Li, Cheng, 2010. "Government Size and Macroeconomic Stability: Sub-National Evidence from China," MPRA Paper 28226, University Library of Munich, Germany.

    More about this item

    Keywords

    Deflationary Expansion; China; Existence and Stability Conditions of Equilibrium; Business Fluctuations; monetary policy; Central Banking; Supply of Money and Credit;

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • P24 - Economic Systems - - Socialist Systems and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation

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