A DSGE Model of China

37 Pages Posted: 10 Nov 2014

See all articles by Li Dai

Li Dai

Loyola Marymount University - College of Business Administration

Patrick Minford

Cardiff University Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2014

Abstract

We use available methods for testing macro models to evaluate a model of China over the period from Deng Xiaoping's reforms up until the crisis period. Bayesian ranking methods are heavily influenced by controversial priors on the degree of price/wage rigidity. When the overall models are tested by Likelihood or Indirect Inference methods, the New Keynesian model is rejected in favour of one with a fair-sized competitive product market sector. This model behaves quite a lot more 'flexibly' than the New Keynesian.

Keywords: Bayesian Inference, China, DSGE, Indirect Inference

JEL Classification: C11, C15, C18, E27

Suggested Citation

Dai, Li and Minford, Patrick, A DSGE Model of China (November 2014). CEPR Discussion Paper No. DP10238. Available at SSRN: https://ssrn.com/abstract=2521459

Li Dai (Contact Author)

Loyola Marymount University - College of Business Administration ( email )

Los Angeles, CA 90045
United States

Patrick Minford

Cardiff University Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 29 2087 5728 (Phone)
+44 29 2087 4419 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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