Scandinavian Working Papers in Economics
Working Paper Series,
Stockholm School of Economics, China Economic Research Center
No 2009-7: SOURCES OF BUSINESS CYCLE FLUCTUATIONS: COMPARING CHINA AND INDIA
Christer Ljungwall () and Xu Gao
Additional contact information
Christer Ljungwall: China Economic Research Center, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Xu Gao: World Bank, China Group, Beijing Office, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Abstract: This paper investigates the sources of business cycle fluctuations in China and India since 1978/81. Under the framework of a standard neoclassical open economy model with time-varying frictions (wedges), we study the relative importance of efficiency, labor, investment and government consumption wedges on the business cycle phenomenon. This enables us to contrast and compare the two countries’ experience in a way remarkably different from previous studies. The results for both China and India show that efficiency wedge is the main source of economic fluctuations, while the investment wedge and government consumption wedge played minor roles in generating business cycles.
Keywords: Business cycle fluctuations; Business cycle accounting; China; India
23 pages, May 1, 2009
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