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Abstract
In order to identify the causes of China’s new business cycle patterns, such as an obvious downward shift and reduced fluctuations under the ‘New Normal’, this paper develops a large-scale dynamic stochastic general equilibrium model as a unified framework for incorporating technology, investment, trade, economic policy and financial volatility. The main conclusions are as follows. First, as to the causes of the downward shift, the current contraction phase of business cycles is mainly due to narrowing economic policy space, decelerating export growth and higher financial volatility. Secondly, as to the contributors to business cycle fluctuations, export growth deceleration is the main contributor to the current contraction phase of business cycles, while financial volatility is very likely to be a key driver of future business cycle fluctuations. Finally, as to China’s future business cycle patterns, it tends to fluctuate less considering the effects of numerous temporary shocks have emerged so far.
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No potential conflict of interest was reported by the author(s).
Additional information
Notes on contributors
Yang Song
Yang Song (1984-), Associate Professor, School of Public Finance and Taxation at Southwestern University of Finance and Economics , 555 Liutai Avenue, Chengdu, Sichuan 611130 China PR, Email: [email protected], majored in development economics and financial economics
Dayu Liu
Dayu Liu (Corresponding author*) (1988-), Associate Professor, Quantitative Economics Center at Jilin University, 2699 Qianjin Street, Changchun, Jilin 130012 China PR, Email: [email protected], majored in macroeconometric analysis and monetary policy
Ziyu Liu
Ziyu Liu (1989-), Postdoctoral Researcher, School of Economics and Statistics at Guangzhou University, 230 Wai Huan Xi Road, Guangzhou, Guangdong 510006 China PR, Email: [email protected], majored in macroeconometric analysis and monetary policy