Study On Economic Cycle Of China

This article analyzes economic cycle of china in angle of markov switching.Based on quality of economic growth rate, we establish model with markov switching. A quality of model import a dummy variable which can separate the series into two parts. Then erect model of growth rate of consumption and investment. Through the graph of smoothed probability of rate of economy , we obtain the same cycle to others way before reformation .the cycle have a little difference after opening and reform, but period of contraction have longer time, especially recent years. This can explain stability of economy, which is owned to adjustment of government. The model estimates that period of expansion is 3 years, and period of contraction is 3.5 years. 2005 and 2006 years is the state of expansion. Because period of expansion is 3 years, we predict that 2007 year is the state of expansion. Olympic Games will stage in 2008 . Development of economy will come to head .We predict that 2009 years is turning point of expansion and contraction of economy. In order to avoid of declining , government reasonably apply monetary and fiscal policy . Comparing to the growth rate of consumption and investment, we discovered that the growth of consumption is the stablest , especially recent years. This has relation to policy of government. The growth rate of investment has best strong influence on growth of economy and later effcet also fluctuation of the growth rate is best severe . In order to reach wise investment ,we must rationally apply policy of government .Next this article takes advantage of the above analytic results to model , it put three variable into vector, then establish a state space model with markov switching. The state variable is a new coincident index. Through estimating parameter, it found the factor of investment is the best strong , also the smoothed probability of coincident index is close to the growth rate of investment ,only absent is recent years. This point proved the growth rate of investment is declining and consumption plays important role in economy . Through analyzing ,we can know the factor that drive the growth rate of economy is the growth rate of investment, stimulating consumption has effect ,but has a little .This article's another quality is based on prior information ,through MCMC sampling we can acquire probability of expansion and contraction. This way conquered shortness of sample and assessment based on estimated parameter .