Based On The Mechanism Of China's Economic Cyclical Fluctuation In The Currency

Cyclical fluctuations in China’s economy are related to macroeconomiccontroling practice and theoretical issues. Learning from the existing literature, weuse a dynamic stochastic general equilibrium analysis framework to build a realbusiness cycle model with monetary shocks (the model economy includes foureconomic agents that is residents, enterprises, commercial banks and monetaryauthorities). We try to portray the source of cyclical fluctuations and the conductionmechanism. there are three factors driving the fluctuations in the model economy:monetary authorities injected liquidity to commercial banks, leading to inflation ordeflation, it changes the actual financing costs and the actual interest income ofresidents, thus affecting corporates’ decisions of investment and financing andresidents’ saving decision; exogenous technology shocks change the productionfunction, affecting corporates’ production decisions; import and export fluctuationscause the fluctuations of the GDP.The dissertation describes the four economic cycles since Reform andOpening-Up. Statistical analysis showes: Since Reform and Opening-Up, China’seconomic cyclical fluctuations is mainly reflected in the fluctuations of investment;since2000, the cyclical fluctuations of the economy is mainly reflected in thefluctuations of net exports, which ontributed77%of the economic fluctuations in2000-2009, It reflected that China’s economy integrating into the global economy.The model’s simulating results matched the real economy’s volatilities very well.The simulation of the economy can explain more than90%of the output and finalconsumption’s volatilities, can also explain the capital formation volatility by morethan80%. In the simulation of the economy, in initial time, one-time money supplyshocks have no lasting impact on macroeconomic variables. Whether the technologyimpulse is permanent or just one-time, it has long-lasting effect on consumption andinvestment growth rate, and it has influence on the output with asymmetric effects.After decomposing the output growth rate, we find that the change of total factorproductivity growth rate is the main source of the output’s fluctuation, and total factorproductivity growth rate’s volatility depends on the volatility of the weighted laborproductivity growth rate. Exerting the net exports-GDP ratio with a one-time impulseat the beginning of the period, it has no significant impact on the mean and standarddeviation; after permanently increasing the standard deviation of the net exports-GDPratio, the mean and standard deviation of the net exports-GDP ratio significantlyincreased. According to the theoretical explanation and empirical conclusions, thisdissertation offers recommendations in order to improve the effectiveness ofmacro-control policy and lower economic cyclical volatility.