An Estimated DSGE Model for Business Cycle Analysis in China

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.

A Study of Coordinating China's Two-Pillar Regulatory Policy under the Shock of the Fed's Interest Rate Hike-From the Perspective of"Stable Growth"and"Risk Prevention"

Domestic asset price fluctuations triggered by the impact of the Fed's interest rate hike may lead to a spiral of mutual feedback between fluctuations in real economy and systematic risks of the financial sector.By constructing a DSGE model of small-scale open economy including cross-border capital flows and supply-demand financial frictions,this paper describes the negative feedback mechanism formed by the interplay between domestic real-economy fluctuations and financial risks on both supply and demand sides under the impact of Fed's interest rate hike,and studies how to coordinate monetary policy and macroprudential policies under the goals of maintaining stable growth and preventing risks.

Financial Resource Allocation,Technological Progress and High-Quality Economic Development

Along with the changes in China's development stage and internal and external conditions,sci-techinnovation has become the core driving force for China's high-quality economic development in the new era.From the perspective of financedriven technological progress,this paper constructs an endogenous growth DSGE model to analyze the relationship between financial resource allocation,technological progress,and economic growth.This study proves the counter-cyclicality of technological innovation in China,and finds that the allocation of financial resources between enterprises'productive investment and innovation investment can affect economic growth by changing the scale of factor inputs and technological progress rate,and that there is a see-saw relationship between these two effects,with thelatter dominant.On that basis,this paper explains the dynamic transmission mechanism among finance,technology and economy.During theeeconomic expansion period,enterprises expand their production scale,financial resources providemoreesupport to productive investment,with less support to innovation investment,thus the technological progress rate goes down;and during the economic contraction period,enterprises reduce their production scale,ffinancial resources cut support to productive investmentand turn to innovation investment,SO technologicalpl rogress rategoes up.The implications of this study on policy are as follows:when faced with new contradictions and challenges in the current development stage,China should get a grip on the new development pattern,seize new opportunities,further deepen financial reforms,optimize the financial resource allocation mechanism,encourage innovation investment,and give full play to the role ofequity markets in supporting corporate R&D and innovation.Meanwhile,coupling with prudent and moderate macro-control policies,China should provide a positive macroenvironment for corporate innovation,stimulate corporate on innovation demand,promote technological progress,andboost high-quality economic development.