Has Chinese economy become more stable?

Chengsi Zhang

Journal of the Asia Pacific Economy, 2013, vol. 18, issue 1, 133-148

Abstract: This article employs structural break tests of unknown point with nuisance parameter to test for possible break in China's business cycle volatility and identifies that the last quarter of 1995 is the significant structural break point. The paper then constructs a counterfactual analysis to examine the driving factors of the structural change in China's business cycle fluctuations. The results of several robustness analyses suggest that systematic improvements in macroeconomic policies account for 20%–40% of the change while the remaining portion is explained by the reduction in the volatility of random shocks. These findings provide important implications for the ongoing economic revolution and policy adjustment in China.

Date: 2013
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DOI: 10.1080/13547860.2012.742717

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