Measurement Of Regional Business Cycle And Analysis Of Synchronization

With the development of China, the economy shows synchronization. Thus it's more meaningful to study the fluctuation of economy from the angle of region. But the traditional method is restricted by the statistics of region and judges the business cycle from single angle. Therefore it's necessary to find a new method.Otherwise, the trend of regional economy shows not only the synchronization of the whole economy but also of neighborhood. The neighborhood results in the same behavioral habits, complementary economic structure, intense trade, interaction of labor and synchronous fiscal policy, which will enhance the integration of region. Then it's necessary to study the synchronization of business cycle from spatial sight. So the paper establishes the approximate dynamic factor model (DFM) using panel data to measure national, eastern, central and western business cycle from the angel of region and multi-variable for the first time. The approximate DFM estimated by QMLE can be a common way to measure the specified region. What's more, in order to study the spatial dependence, the paper decomposes the economic variable into national common shock, regional shock incurred by neighborhood and individual shock using the approximate DFM combined with spatial error autocorrelation. Meanwhile, the paper tries to set varied spatial error autocorrelation according to different variable which defines the spatial dependence of different variable.According to the analysis, the paper gets the following results: 1) Based on the measurement of common factor the paper identifies four period of business cycle of China: 1981-1986, 1986-1990, 1990-1999 and 1999 to now. 2) China displays the obvious regional integration and three obvious sub-regions, among which eastern region shows the greatest degree of regional integration, then followed by central region, and western region comes the last. 3) The national business cycle shows stronger persistence than eastern business cycle. However the central and western business cycle shows the sign of reversal. Meanwhile the fluctuation of regional business cycle and national business cycle becomes small after Asian finance crisis. 4) Strong spatial dependence exists in the Chinese economy. The spatial dependence of economic growth is strong while price's isn't.