This paper studies the stationary probability density function(PDF) solution of a nonlinear business cycle model subjected to random shocks of Gaussian white-noise type. The PDF solution is controlled by a Fokker–P...This paper studies the stationary probability density function(PDF) solution of a nonlinear business cycle model subjected to random shocks of Gaussian white-noise type. The PDF solution is controlled by a Fokker–Planck– Kolmogorov(FPK) equation, and we use exponential polynomial closure(EPC) method to derive an approximate solution for the FPK equation. Numerical results obtained from EPC method, better than those from Gaussian closure method, show good agreement with the probability distribution obtained with Monte Carlo simulation including the tail regions.展开更多
Friedman's plucking model of business fluctuations suggests that output cannot exceed an upper limit, but it is occasionally "plucked" downward below trends as a result of economic recessions. This paper investigat...Friedman's plucking model of business fluctuations suggests that output cannot exceed an upper limit, but it is occasionally "plucked" downward below trends as a result of economic recessions. This paper investigates China's business fluetuations using quarterly real GDP data for the period 1978 2009. Our results show some evidence supporting Friedman's plucking model. We find that a ceiling effect of real output exists, and that negative asymmetric shocks significantly affect the transitory component, which captures the plucking downward behavior during the recession. The results also suggest that the basic asymmetric unobserved component model is not appropriate for directly modeling China's real output because the business" cycle is inaccurately measured, but it works quite well when considering a structural break in the second quarter of 1992. The results reveal that although China's economy strengthened in the second quarter of 2009, it is essential for China's government to take further positive and effective measures to maintain sustainable development of the economy.展开更多
Recent studies show that investor participation in the stock market rises during economic expansion and drops in economic recession. When investor participation is high, investors' cognitive and behavioral biases are...Recent studies show that investor participation in the stock market rises during economic expansion and drops in economic recession. When investor participation is high, investors' cognitive and behavioral biases are likely to have a strong influence on stock prices. We consider four trading strategies that are based on well-known market anomalies and examine their profitability under different economic conditions. For all four strategies, the portfolios that are formed in the months when the economy is expanding obtain significant profits, whereas the portfolios formed in economic recession months are not profitable. This finding is robust to different ways of classifying recession months.展开更多
Agent-based modeling and controlled human experiments serve as two fundamental research methods in the field of econophysics. Agent-based modeling has been in development for over 20 years, but how to design virtual a...Agent-based modeling and controlled human experiments serve as two fundamental research methods in the field of econophysics. Agent-based modeling has been in development for over 20 years, but how to design virtual agents with high levels of human-like "intelligence" remains a challenge. On the other hand, experimental econophysics is an emerging field; however, there is a lack of experience and paradigms related to the field. Here, we review some of the most recent research results obtained through the use of these two methods concerning financial problems such as chaos, leverage, and business cycles. We also review the principles behind assessments of agents' intelligence levels, and some relevant designs for human experiments. The main theme of this review is to show that by combining theory, agent-based modeling, and controlled human experiments, one can garner more reliable and credible results on account of a better verification of theory; accordingly, this way, a wider range of economic and financial problems and phenomena can be studied.展开更多
The major objectives of China's macroeconomic policy are to stabilize economic growth and inflation, which, in turn, are important factors determining key prices, such as the policy interest rate, the renminbi exchan...The major objectives of China's macroeconomic policy are to stabilize economic growth and inflation, which, in turn, are important factors determining key prices, such as the policy interest rate, the renminbi exchange rate and stockprices. In a framework that distinguishes different phases of the business cycle based on whether the current period's economic growth rate and inflation rate are above or below their "'normal" values, this paper analyzes the interaction among macroeconomic policy, economic growth and inflation in China since the Lehman crisis, and the implications for these key prices. The path of China's economy indicates that stimulus measures taken by the government during the recession phase and tightening measures implemented during the overheating phase have helped minimize the fluctuation over the business cycle. Our analysis shows that Chinese authorities tend to rely more on adjusting the exchange rate than the interest rate to stabilize the economy. Comparing with conditions at the time of the post-Lehman recession, the current slowpace of economie growth in China may reflect not only weakening demand, but also a lowerpotential growth rate associated with the arrival of the Lewis turning point.展开更多
This paper investigates the link between hot money and business cycle volatility in China from January 1997 to December 2009. Using the structural vector error correction model we find a considerable degree of long-ru...This paper investigates the link between hot money and business cycle volatility in China from January 1997 to December 2009. Using the structural vector error correction model we find a considerable degree of long-run cointegration and bidirectional causality effects between hot money and business cycle volatility. The speculative shocks are found to temporarily promote China's economic growth, but also to exacerbate business cycle volatility. The liquidity shock stemming from hot money is shown to be the primary factor responsible for the significantly enhanced fluctuation in business cycles during the most recent global financial crisis period This could be detrimental to the smooth operation of financial markets. Therefore, informing future policies, it is critical for policy-makers to take precautions against the speculative factors.展开更多
We develop a recession forecasting framework using a less restrictive target variable and more flexible and inclusive specification than those used in the literature.The target variable captures the occurrence of a re...We develop a recession forecasting framework using a less restrictive target variable and more flexible and inclusive specification than those used in the literature.The target variable captures the occurrence of a recession within a given future period rather than at a specific future point in time(widely used in the literature).The modeling specification combines an autoregressive Logit model capturing the autocorrelation of business cycles,a dynamic factor model encompassing many economic and financial variables,and a mixed data sampling regression incorporating common factors with mixed sampling frequencies.The model gene rates significantly more accurate forecasts for U.S.recessions with smaller forecast errors and stronger early signals for the turning points of business cycles than those gene rated by existing models.展开更多
Extant literature has argued that,with major extension of democracy since the 1990s,political business cycle has become more intense and has made African political systems more fragile.In light of this,this paper exam...Extant literature has argued that,with major extension of democracy since the 1990s,political business cycle has become more intense and has made African political systems more fragile.In light of this,this paper examines both the existence of African political business cycles and their impact on human development.It confirms the existence of political business cycles in Africa.Estimates of a panel fixed effects and system-GMM regression techniques for 38 African countries from 1990 to 2015 also suggest that such cycles worsen human development in African countries.This finding is consistent if we limit our analysis to various sub-regions of Africa,and also at two different income levels.展开更多
Politics is an important cause of economic growth and fluctuations.We present a new Political Business Cycle(PBC)Theory based on the background of recent Chinese economic transformation and government behaviors,explor...Politics is an important cause of economic growth and fluctuations.We present a new Political Business Cycle(PBC)Theory based on the background of recent Chinese economic transformation and government behaviors,explore the economic impact of the National Congress of the Communist Party of China(CPC),the National People’s Congress(NPC)and Chinese People’s Political Consultive Conference(CPPCC)and how they shape and influence the behaviors of local government officials.Based on 1994-2012 inter-provincial panel data of China and using SYS-GMM and LSDVC,we find that there are significant effects in China of PBC and government administration change.Changes in government administration influence the economic behaviors of local governments,which in turn influence local economic development through fiscal decentralization and political promotion tournament.These effects are sustained and robust.In this paper we offer an economic explanation for the Chinese proverb“a new broom sweeps clean,”and try to verify the Chinese-style Political Business Cycle(CPBC).We provide new ideas for further improving the functions of government,optimizing macroeconomic control,and preventing personnel changes in the government from overheating the economy.展开更多
A small-scale, but highly-stylized dynamic stochastic general equilibrium model is estimated by the maximum likelihood method using Chinese quarterly data. Model specifications and parameter equalities between various...A small-scale, but highly-stylized dynamic stochastic general equilibrium model is estimated by the maximum likelihood method using Chinese quarterly data. Model specifications and parameter equalities between various competing model variants are addressed by formal statistical hypothesis tests, while implications for business cycle fluctuations are evaluated via a variance decomposition experiment, second-moments matching, and some out-of-sample forecast exercises. It is highlighted that the monetary authority takes an aggressive stance to the current inflation pressure (there is a significant lagged response), while leaving less attention to changes in aggregate output. Variance decomposition reveals that large percentages of variations in real and nominal variables are explained by the highly volatile preference and potential output shock, respectively. When nominal and real frictions as well as additional shocks are included, overall our estimated model can successfully reproduce the stylized facts from actual data of Chinese business cycles and frequently can even outperform those forecasts from an unconstrained VAR.展开更多
基金supported by the National Natural Science Foundation of China(11302157)Fundamental Research Funds for the Central Universities(K5051370008)Chinese-Serbian Science&Technology Cooperation(2-14)
文摘This paper studies the stationary probability density function(PDF) solution of a nonlinear business cycle model subjected to random shocks of Gaussian white-noise type. The PDF solution is controlled by a Fokker–Planck– Kolmogorov(FPK) equation, and we use exponential polynomial closure(EPC) method to derive an approximate solution for the FPK equation. Numerical results obtained from EPC method, better than those from Gaussian closure method, show good agreement with the probability distribution obtained with Monte Carlo simulation including the tail regions.
文摘Friedman's plucking model of business fluctuations suggests that output cannot exceed an upper limit, but it is occasionally "plucked" downward below trends as a result of economic recessions. This paper investigates China's business fluetuations using quarterly real GDP data for the period 1978 2009. Our results show some evidence supporting Friedman's plucking model. We find that a ceiling effect of real output exists, and that negative asymmetric shocks significantly affect the transitory component, which captures the plucking downward behavior during the recession. The results also suggest that the basic asymmetric unobserved component model is not appropriate for directly modeling China's real output because the business" cycle is inaccurately measured, but it works quite well when considering a structural break in the second quarter of 1992. The results reveal that although China's economy strengthened in the second quarter of 2009, it is essential for China's government to take further positive and effective measures to maintain sustainable development of the economy.
文摘Recent studies show that investor participation in the stock market rises during economic expansion and drops in economic recession. When investor participation is high, investors' cognitive and behavioral biases are likely to have a strong influence on stock prices. We consider four trading strategies that are based on well-known market anomalies and examine their profitability under different economic conditions. For all four strategies, the portfolios that are formed in the months when the economy is expanding obtain significant profits, whereas the portfolios formed in economic recession months are not profitable. This finding is robust to different ways of classifying recession months.
文摘Agent-based modeling and controlled human experiments serve as two fundamental research methods in the field of econophysics. Agent-based modeling has been in development for over 20 years, but how to design virtual agents with high levels of human-like "intelligence" remains a challenge. On the other hand, experimental econophysics is an emerging field; however, there is a lack of experience and paradigms related to the field. Here, we review some of the most recent research results obtained through the use of these two methods concerning financial problems such as chaos, leverage, and business cycles. We also review the principles behind assessments of agents' intelligence levels, and some relevant designs for human experiments. The main theme of this review is to show that by combining theory, agent-based modeling, and controlled human experiments, one can garner more reliable and credible results on account of a better verification of theory; accordingly, this way, a wider range of economic and financial problems and phenomena can be studied.
文摘The major objectives of China's macroeconomic policy are to stabilize economic growth and inflation, which, in turn, are important factors determining key prices, such as the policy interest rate, the renminbi exchange rate and stockprices. In a framework that distinguishes different phases of the business cycle based on whether the current period's economic growth rate and inflation rate are above or below their "'normal" values, this paper analyzes the interaction among macroeconomic policy, economic growth and inflation in China since the Lehman crisis, and the implications for these key prices. The path of China's economy indicates that stimulus measures taken by the government during the recession phase and tightening measures implemented during the overheating phase have helped minimize the fluctuation over the business cycle. Our analysis shows that Chinese authorities tend to rely more on adjusting the exchange rate than the interest rate to stabilize the economy. Comparing with conditions at the time of the post-Lehman recession, the current slowpace of economie growth in China may reflect not only weakening demand, but also a lowerpotential growth rate associated with the arrival of the Lewis turning point.
基金supported by the Program for New Century Excellent Talents in University(NCET) of China
文摘This paper investigates the link between hot money and business cycle volatility in China from January 1997 to December 2009. Using the structural vector error correction model we find a considerable degree of long-run cointegration and bidirectional causality effects between hot money and business cycle volatility. The speculative shocks are found to temporarily promote China's economic growth, but also to exacerbate business cycle volatility. The liquidity shock stemming from hot money is shown to be the primary factor responsible for the significantly enhanced fluctuation in business cycles during the most recent global financial crisis period This could be detrimental to the smooth operation of financial markets. Therefore, informing future policies, it is critical for policy-makers to take precautions against the speculative factors.
基金funding from School of Accounting and Finance,Faculty of Business,Hong Kong Polytechnic University.
文摘We develop a recession forecasting framework using a less restrictive target variable and more flexible and inclusive specification than those used in the literature.The target variable captures the occurrence of a recession within a given future period rather than at a specific future point in time(widely used in the literature).The modeling specification combines an autoregressive Logit model capturing the autocorrelation of business cycles,a dynamic factor model encompassing many economic and financial variables,and a mixed data sampling regression incorporating common factors with mixed sampling frequencies.The model gene rates significantly more accurate forecasts for U.S.recessions with smaller forecast errors and stronger early signals for the turning points of business cycles than those gene rated by existing models.
文摘Extant literature has argued that,with major extension of democracy since the 1990s,political business cycle has become more intense and has made African political systems more fragile.In light of this,this paper examines both the existence of African political business cycles and their impact on human development.It confirms the existence of political business cycles in Africa.Estimates of a panel fixed effects and system-GMM regression techniques for 38 African countries from 1990 to 2015 also suggest that such cycles worsen human development in African countries.This finding is consistent if we limit our analysis to various sub-regions of Africa,and also at two different income levels.
基金National Social Science Fund“The Institutional Poverty and the Poverty Reduction Model of Inclusive Growth”(11CJL033)The Philosophy and Social Science Planning Fund in Zhejing Province“Estimation of the Conversion Cost of Farmer Citizens in Zhejiang Province and the Study of Public Policy Choice”(14NDJC120YB)The commissioned project in Zhejiang province“the Impact of Political Environment on the Economic and Trade Cooperation between Zhejiang and Taiwan”(201401).
文摘Politics is an important cause of economic growth and fluctuations.We present a new Political Business Cycle(PBC)Theory based on the background of recent Chinese economic transformation and government behaviors,explore the economic impact of the National Congress of the Communist Party of China(CPC),the National People’s Congress(NPC)and Chinese People’s Political Consultive Conference(CPPCC)and how they shape and influence the behaviors of local government officials.Based on 1994-2012 inter-provincial panel data of China and using SYS-GMM and LSDVC,we find that there are significant effects in China of PBC and government administration change.Changes in government administration influence the economic behaviors of local governments,which in turn influence local economic development through fiscal decentralization and political promotion tournament.These effects are sustained and robust.In this paper we offer an economic explanation for the Chinese proverb“a new broom sweeps clean,”and try to verify the Chinese-style Political Business Cycle(CPBC).We provide new ideas for further improving the functions of government,optimizing macroeconomic control,and preventing personnel changes in the government from overheating the economy.
文摘A small-scale, but highly-stylized dynamic stochastic general equilibrium model is estimated by the maximum likelihood method using Chinese quarterly data. Model specifications and parameter equalities between various competing model variants are addressed by formal statistical hypothesis tests, while implications for business cycle fluctuations are evaluated via a variance decomposition experiment, second-moments matching, and some out-of-sample forecast exercises. It is highlighted that the monetary authority takes an aggressive stance to the current inflation pressure (there is a significant lagged response), while leaving less attention to changes in aggregate output. Variance decomposition reveals that large percentages of variations in real and nominal variables are explained by the highly volatile preference and potential output shock, respectively. When nominal and real frictions as well as additional shocks are included, overall our estimated model can successfully reproduce the stylized facts from actual data of Chinese business cycles and frequently can even outperform those forecasts from an unconstrained VAR.