Trends and Cycles in China's Macroeconomy

76 Pages Posted: 11 May 2018

See all articles by Chun Chang

Chun Chang

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF)

Kaiji Chen

Emory University - Department of Economics

Daniel F. Waggoner

Federal Reserve Bank of Atlanta

Tao A. Zha

Federal Reserve Bank of Atlanta; Emory University

Multiple version iconThere are 3 versions of this paper

Date Written: April 27, 2018

Abstract

Although the non-financial corporate sector accounts for the lion’s share of the post-Global Financial Crisis. We make four contributions in this paper. First, we provide a core of macroeconomic time series usable for systematic research on China. Second, we document, through various empirical methods, the robust findings about striking patterns of trend and cycle. Third, we build a theoretical model that accounts for these facts. Fourth, the model’s mechanism and assumptions are corroborated by institutional details, disaggregated data, and banking time series, all of which are distinctive of Chinese characteristics. We argue that preferential credit policy for promoting heavy industries accounts for the unusual cyclical patterns as well as the post-1990s economic transition featured by the persistently rising investment rate, the declining labor income share, and a growing foreign surplus. Th e departure of our theoretical model from standard ones offers a constructive framework for studying China’s modern macroeconomy.

Keywords: Reallocation, between-sector effect, TFP growth, heavy vs. light sectors, long-term vs. short-term loans, labor share, lending frictions, incentive compatibility

JEL Classification: E, F4, G1

Suggested Citation

Chang, Chun and Chen, Kaiji and Waggoner, Daniel F. and Zha, Tao A., Trends and Cycles in China's Macroeconomy (April 27, 2018). Available at SSRN: https://ssrn.com/abstract=3169738 or http://dx.doi.org/10.2139/ssrn.3169738

Chun Chang (Contact Author)

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

Shanghai Jiao Tong University
211 West Huaihai Road
Shanghai, 200030
China

Kaiji Chen

Emory University - Department of Economics ( email )

1602 Fishburne Drive
Atlanta, GA 30322
United States

Daniel F. Waggoner

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States
404-521-8278 (Phone)

Tao A. Zha

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States
404-521-8353 (Phone)
404-521-8956 (Fax)

Emory University ( email )

201 Dowman Drive
Atlanta, GA 30322
United States

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