China’s Business Cycles between 1954 – 2004: Productivity and Fiscal Policy Changes

Minchung Hsu and Min Zhao

MPRA Paper from University Library of Munich, Germany

Abstract: We study the real business cycles in China between 1954-2006, and examine the changes after China’s market-oriented reforms starting in 1978. We overcome some data problems and find that the economic volatility is generally moderated after 1978. However, the relative volatility of each variable to output diverges. We undertake a neo-classical approach to investigate factors that can drive the features of long-term fluctuations and the differences between the pre-1978 and the post-1978 periods. We find that TFP process can explain the main features of fluctuations and the general moderation but not the relative volatility changes. We show that policy changes in government expenditure can account for the relative volatility divergency. Counterfactual experiments are also provided to discover the role of each factor in explaining the long-term fluctuation features in China.

Keywords: business cycles; fiscal policy; market-oriented reforms; China (search for similar items in EconPapers)
JEL-codes: C82 E32 E62 N15 (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:21283

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