Empirical Research On Economic Fluctuations Of China's Key Macroeconomic Variables

Economic growth and economic cycle (also known as fluctuations in the economy) are the two major theoretical macroeconomics.Found by long-term practices,the economic process is some certain regularity of the continuous variable rise and fall form, then adopted the "economic volatility" to reflect the concept of these laws. Fluctuations in the economy are objective of any country's economic system, which can not maintain a constant growth rate of economic growth.The reason to prevent large swings in economic growth was that, the large swings in the economy is very damaging to economic efficiency, and this damage tends to shrink as the extent and the depth of economic fluctuations increases. Only through gradually understanding and mastering the fluctuation of economic cycle we can effectively avoid large swings in the economy and the severe recession of the hazards. With the development of research methods of continuous improvement on economic cycle, China's economy maintained a steady and and rapid development momentum gradually in recent decades. But we can not ignore the changing of world economic environment on the potential impact of the economy. Only through establishing effective business cycle analysis and early warning mechanisms, it will be well predict the future direction of the business cycle, fluctuations in the direction of the volatility ,the various cycle phases and the duration of each cycle stage,in the meantime,It is hoped to make some contribution to the stable development of China's economy momentum. In this paper,we do the empirical analysis of the cyclical fluctuations on the three key macroeconomic variables: gross domestic product GDP, consumer price index CPI and the broad money supply M2, grasp the volatility, sustainability and non-symmetry of the economic cycle and predict future economic trends at last.This paper is divided into four chapters, the content of the concrete structure and the related conclusions are as follows:The first chapter:Introduce the research significance of business cycle Theory and literature review. This article first introduces the research background and significance of the topic, Secondly, the study of business cycle issues summarized the current research status at home and abroad and the emergence of new ideas and new methods. Overseas research on the business cycle can be traced back to the National Bureau of Economic Research (NBER)business cycle chronology established, and later a great influence on Hamilton (1989) model of U.S. GNP by MS analysis of the data. The cycle of domestic economic research relatively start late in the reform and opening up, and the study of the issue has gone through several different stages of development. With the deepening of the study, theoretical models and empirical methods has improved steadily.The second chapter: Overview of methods of theoretical in the economic cycle. Firstly, introduce the meaning of the economic cycle fluctuations and the common four business cycle that were divided by the length of the economic cycle: Kitchin cycle, Zhu Graham cycle, Kuznets cycle, and Kondratieff cycle. Secondly, to explain the business cycle from two aspects :the theory of endogenous economic cycles and exogenous shocks. Endogenous economic cycle point that business cycle is inherent in the phenomenon of the market and the market price mechanism can not guarantee steady state.The completely unbalanced market and the market clearing conditions was caused by a temporary equilibrium time path of chaos within the system produces a cyclical fluctuations.Representatives of the major economic cycle theory: Keynesian economic theories, nonlinear and non-balanced economic cycle theory, new Keynesian business cycle theory and new economic cycle Walrasian model. Exogenous business cycle theory attributed the economic fluctuations to exogenous shocks, such as the production and supply shocks, the policy generated by the impact of macroeconomic policies and private demand shocks. The main representative of school are: stochastic economic cycle theory, monetarism and neo-classical economic theories of macroeconomic school of economic cycle theory. Finally, a brief introduction of the currently used X-12 seasonal adjustment method, and HP filter. The economic time series is divided into the volatility components and the major trends components in composition, in order to eliminate seasonal factors on the impact of data analysis.The third chapter:A simple overview on the Markov regime switching model. First introduce the concept of Markov process. MS model include:based on the conditional mean used Markov regime switching model, based on the conditional variance of the Markov regime switching model, based on the conditional mean and conditional variance of Markov regime switching model. Then introduces parameter estimation on the MS model and the likelihood function and how to get a smooth probability and the probability of filtering. Finally, highlights the Bayesian estimation of Gibbs sampling methods, and this method is applied to Markov chain Monte Carlo Markov chain (Markov Chain Monte Carlo, MCMC) methods, laying the theoretical basis for appling to Chapter IV of inflation Cycle rate of sequence analysis.The fourth chapter: The most important empirical part in this paper--empirical research on markov regime switching model in the main macroeconomic variables.we hope to grasp the overall the non-symmetry and continuity of China's business cycle fluctuations.Firstly, use the MS (3)-AR (1) model to do the empirical analysis on the 1978Q1- 2010Q4 quarterly GDP series.Concluded that: MS(3)-AR(1)model substantially support our "economic cycle of growth process divedes by three-zone system"[40]. It also shows that the volatility of economic cycles has continuity and non-symmetry. In some extent. China's economic cycle can be divided into three zone system, the average duration of the "appropriate speed growth phase " is 3 more times than the other two district system, which means that rapid growth is still the main features at this stage. One thing to note is that starting from 2010Q4, our economy went into the continued expansion stage and the GDP growth continued to rise, China's economy in 2011 are forecast to continue to run in this area at this trend, the Government must take appropriate macroeconomic policies to prevent overheating of the economy persists. From 1996Q1 to 2010Q4,China's M2 supply divided into two-state system, we can see that M2 growth rate of the system by the second district, has a good simulation of the business cycle in China non-symmetry and continuity characteristics on the other hand. Finally, using the Gibbs sampling and Bayesian estimation method, to empirically analysis the inflation rate from 1990Q1 to 2010Q4 and the inflation rate fitting results support the division of III district system.sequences:deflation, inflation moderate and inflation. At the same time, form the map of inflation smooth probability, we can also see that, China's economy will has the great probability switching to the inflation regime in 2011,which also means China will face tremendous inflation pressure and anti-inflationary policy must be prepared well.