Changing Economic Structures and Impacts of Shocks - Evidence from a DSGE Model for China
27 Pages Posted: 3 May 2011
Date Written: April 4, 2011
Abstract
We construct a small-scale dynamic stochastic general equilibrium (DSGE) model that features price rigidities, habit formation in consumption and costs in capital adjustment, and calibrate the model with data for the Chinese economy. Our interest centers on the impact of technology and monetary policy shocks for different structures of the Chinese economy. In particular, we evaluate how a rebalancing of the economy from investment-led to consumption-led growth would affect the economic dynamics after a shock occurs. Our findings suggest that a rebalancing would reduce the volatility of the real economy in the event of a technology shock, which provides support for policies aiming to increase the consumption share in China.
Keywords: DSGE, rebalancing, monetary policy shocks, technology shocks, China
JEL Classification: E52, E60
Suggested Citation: Suggested Citation
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