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Financial Frictions, Unemployment And Macroeconomic Fluctuations

Posted on:2016-07-08Degree:MasterType:Thesis
Country:ChinaCandidate:L Y ZhangFull Text:PDF
GTID:2297330482473711Subject:Quantitative Economics
Abstract/Summary:PDF Full Text Request
At present our country’s economy belongs to a small open economy. Transnational capital flow of high frequency is an important symbol of China’s financial market opening to the outside. The opening of capital projects, such as consumption, investment and securities to the outside world has made our country transform from closed economy to open economy.This article embarks precisely from our country’s open economic environment, and on the basis of this we build a dynamic stochastic general equilibrium (DSGE) model including hiring frictions and financial frictions. We calibrate the model parameters using China’s economy macro quarterly data from 1992 to 2014, and make use of Bayesian estimation methods for parameter estimation. Finally, we evaluate the model’s practical value by using of impulse response figures, and analysis the effect of monetary policy and the foreign inflation shock.The main contribution of this paper is building a DSGE model that is suitable for China’s national conditions. It can be reused and be compared to the foreign economic model conveniently. The main innovation points of this paper are that many frictions, such as employment friction and financial friction encompass, are included in the real economy, which makes the model has a good match to the current macro economic. Through the analysis of the impulse response function diagrams, we found about four important points:first, compared with foreign product price stickiness, product price stickiness (about 0.6237) in the local market is lower, but the import and export product price stickiness (no higher than 0.32) is relatively lower. The benefits for works in unemployment state are 0.4989, and the separation rate in each quarter is 0.2357. These two data are in conformity with the situation in our country. Second, the rising of domestic interest rates can curb inflation modestly, but also for the production as well as the labor employment. Third:the rising of exogenous foreign inflation and foreign output, play positive roles in promoting domestic outputs as well as hiring rates, but at the same time, it will cause the considerable increase of inflation The rising of exogenous foreign rate, plays negative roles in promoting domestic outputs as well as hiring rates, but at the same time, it will cause the small decrease of inflation.
Keywords/Search Tags:Open Economy, DSGE, Labor Market, Financial Accelerator
PDF Full Text Request
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