Financial Shocks and Chinese Business Cycles
Read
DownLoad |
| Title | Financial Shocks and Chinese Business Cycles
|
| Author | Wang Guojing, Tian Guoqiang |
| Organization | Shanghai University of Finance and Economics |
| Email | gtian@tamu.edu |
| Key Words | Financial Frictions; Financial Shocks; Business Cycle; DSGE Model |
| Abstract | The recent financial crisis and the resulting economic crisis highlighted the links between financial factors and the real economy. These events have made it clear that macroeconomic models need to allocate a nonnegligible role to financial frictions and financial shocks. We then develop a dynamic stochastic general equilibrium model to explore how the dynamics of real and financial variables are affected by financial shocks and discuss the importance of financial shocks. And we estimate the structure parameters of the model by using Bayesian methods. We find that financial shocks are the most important driving force of China’s business cycle and they play an important role in explaining the volatility of the growth rate of output, investment, debt, wages and labor, they can explain about 80% of the variances of output growth even with other shocks. And we find that a negative financial shock produces a large drop in output, consumption, investment and labor. |
| Serial Number | WP585 |
| Time | 2014-01-14 |
|