Research On The Fluctuations Of China Economy: At The Aggregate And Sectoral Level

China began to reform for establishing the socialist market economy since 1992. From then on, the remarkable achievements have been made in economic development. In 2010, China's GDP ranked second in the worldwide. After "soft landing" in 1996, China experienced economic growth lasting more than ten years. During this period, aggregate output fluctuated frequently, but gently. In 2008, the international financial crisis changed China's international economic enviroment largely. The volatility of aggregate output increased. Inflation performed similarly with aggregate output's volatility. At the end of 2009, the Central Economic Work Conference emphasized speeding up the change in the mode of economic development. In economic growth from extensive to intensive process of change, sectoral restructuring plays an important role. This dissertation wants to find the factors causing China's economic fluctuations, the factors causing the last economic volatility, the role of fiscal policy and monetary policy in the economic fluctuations and the effect of sectoral fluctuations on the economy.The dissertation chooses the New Keynesian model as the theoretical methodological tool. The chaper 2 estimates the business cycles in China and analysizes the statistical characteristics of the macroeconomic variables. The research framework is theoretical analysis followed by empirical test and analysis in aggregate level followed by sectoral level.The chapter 3 constructs a New Keynesian model including numerous nominal and real frictions. The chapter 5 estimates the parameters of the model. Calibrates the parameters governing the steady state based on quarterly data and estimates the dynamic parameters of the core model with Bayesian methods. The chapter 6 decomposes economic fluctuations caused by various exogenous shocks, analyzes their transmission mechanisms and the dynamic nature of the model. I discuss the impacts of government spending with and without expection, then compare the effect of monetary shocks in endogenous money condition with in exogenous money condition, at last analyze the different transmission with different monetary reaction coefficients. Based on the demand chains among sectors and Input-Output table, the chapter 7 constructs a GVAR (Gloable VAR) model to analyze macro-economic fluctuations and the effect of monetary policy at the sectoral level.The dissertation carefully calibrates and estimates the parameters. Partial parameters of steady-state are set according to means of the observations of key variables in sample period. We match steady state to the main ratios. Because the interest rates of deposits and loans are not completely determined by financial markets, I use money growth rate to characterize Chinese monetary policy instead of Taylor rules.The dissertation analyzes the source of economic fluctuations in different business cycles and finds that technology advances and institutional changes were the main drivers of China's business fluctuations during 1992Q1 to 1994Q3. After the international financial crisis, the output fluctuations were caused by both the government spending shock and the economic structure. The fluctuations of inflation were mainly caused by monetary polices.After simulating the different monetary reaction coefficents, I find that China's money growth rules should take account into both inflation and output. The monetary policy couldn't smoothen economic fluctuations if it reacts only to inflation. At the sectoral level, monetary policy has different influences on different sectors.The research indicates that the restructuring in different sectors has different shocks on macro-economic fluctuations; even in the same sector, the aggregate output responses differently to different restructuring approach. Introduction of new technology in single sector has mainly direct effect on aggregate output; renovation in single sector has more effect on aggregate output due to feedback among sectors.