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

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  • Zhang, Yin
  • Wan, Guanghua

Abstract

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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Suggested Citation

  • Zhang, Yin & Wan, Guanghua, 2004. "China's Business Cycles: Perspectives from an AD-AS Model," WIDER Working Paper Series 054, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:rp2004-54
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    Cited by:

    1. You, Kefei & Solomon, Offiong Helen, 2015. "China's outward foreign direct investment and domestic investment: An industrial level analysis," China Economic Review, Elsevier, vol. 34(C), pages 249-260.
    2. Gao, Xu, 2007. "Business Cycle Accounting for the Chinese Economy," MPRA Paper 7050, University Library of Munich, Germany, revised Dec 2007.
    3. Gatfaoui, Jamel & Girardin, Eric, 2015. "Comovement of Chinese provincial business cycles," Economic Modelling, Elsevier, vol. 44(C), pages 294-306.
    4. 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.
    5. 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.
    6. Min Gong & Wenpu Li, 2010. "Assessing the role of aggregate demand and supply shocks in China’s macroeconomic fluctuation," Frontiers of Economics in China, Springer;Higher Education Press, vol. 5(3), pages 464-488, September.
    7. Li, Cheng, 2010. "Government Size and Macroeconomic Stability: Sub-National Evidence from China," MPRA Paper 28226, University Library of Munich, Germany.

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