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SOURCES OF BUSINESS CYCLE FLUCTUATIONS: COMPARING CHINA AND INDIA

Christer Ljungwall () and Xu Gao
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Christer Ljungwall: China Economic Research Center, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Xu Gao: World Bank, China Group, Beijing Office, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

No 2009-7, Working Paper Series from Stockholm School of Economics, China Economic Research Center

Abstract: This paper investigates the sources of business cycle fluctuations in China and India since 1978/81. Under the framework of a standard neoclassical open economy model with time-varying frictions (wedges), we study the relative importance of efficiency, labor, investment and government consumption wedges on the business cycle phenomenon. This enables us to contrast and compare the two countries’ experience in a way remarkably different from previous studies. The results for both China and India show that efficiency wedge is the main source of economic fluctuations, while the investment wedge and government consumption wedge played minor roles in generating business cycles.

Keywords: Business cycle fluctuations; Business cycle accounting; China; India (search for similar items in EconPapers)
JEL-codes: E32 E37 O47 O53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-cwa, nep-dge, nep-mac and nep-tra
Date: 2009-05-01
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