BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 5/2011:
Changing economic structures and impacts of shocks — evidence from a DSGE model for China
Aaron Mehrotra ()
, Riikka Nuutilainen ()
and Jenni Pääkkönen
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; (follow links to similar papers)
JEL-Codes: E52; E60; (follow links to similar papers)
27 pages, April 28, 2011
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