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Terms of Trade, External Interest Rate and Business Cycle in China |
LI Leiming1,GE Jingguang1,2 |
1. School of Economics and Management, China University of Petroleum (East China)
2. School of Humanities, Qingdao Agricultural University |
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Abstract We have explored the characteristics of China’s business cycle after China’s reform and opening to the world by constructing a dynamic model. In the model, we introduce three kinds of economic shocks including terms of trade, world interest rate, and government expenditures. The research shows that the established open-economy model has good performance in explaining the major features of China’s business cycles, and it reveals that the former two shocks have stronger power in explaining China’s business cycles. However, the last shock has poor explanatory power. The research has illustrated that the openness of China’s economy has great significance in understanding the business cycles.
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Received: 11 October 2018
Published: 15 December 2018
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Corresponding Authors:
LI Leiming
E-mail: sdllming707@163.com
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