Government Intervention Ability Difference And Business Cycle Comovement

At present, China is in a critical period of deepening the reform of the economic system, whose core is to reasonable limit the degree, range and means of government intervention, to handle the relationship between economic system reform and external risk prevention. So this paper deeply studies the relationship between government intervention and economic cycle comovement. Firstly, based on their influence mechanism and the endogeneity among conduction channels, designs simultaneous equations model, followed by statistical analysis of the characteristics of economic cycle comovemnet and government intervention ability difference between China and its main trading partners, then theoretically explain and comparatively analyses the mechanism, direction and magnitude of government intervention ability difference influencing economic cycle comovement through different conduction channels. The results indicate that government intervention ability difference affects bilateral business cycle comovement significantly through direct and indirect pathways and the both effects are negative, but the degrees differ obviously. The intertwined endogenous relations among complementary/alternative trade, vertical/horizontal investment and industrial structure as well as the inconsistent effects in direction and degree of government intervention ability difference on different conduction channels make the indirect mechanism quite complex, and its final effect is the comprehensive result of trade’s and industry structure’s negative and investment’s positive influences. The effects of government intervention ability difference on the conduction channels themself are not consistent with that on the business cycle comovement through them, so "the easier, the more effective" might be an illusion.