Analysis On China’s Economic Fluctuations Based On DSGE Models

Since1979, when the reform and opening up started, China’s economic was nearly10%per year in the past30years. China has been experiencing wild business cycle fluctuations as well as high growth speed. What are the reasons of China’s business cycle fluctuations? How to maintain the stability of the economic growth by reducing the fluctuation range? Since the dynamic stochastic general equilibrium been proposed in the1980s, it has become a mainstream research analysis tool of macroeconomic fluctuations and received more attention on country’s macroeconomic decision-making. Therefore, we chose to use the top-level macroeconomics analysis-dynamic stochastic general equilibrium to study China’s economic fluctuations to answer the questions raised at the beginning, which is also the main subject of this study.Three parts construct the body of the dissertation. The first part is theory. This part introduces the origin of DSGE model and the research status and the associated tools based on DSGE methodology. The second part is empirical. This part studies mainly on China’s economic fluctuations. The dissertation constructs a DSGE model including productivity shock, investment environment shock and monetary growth shock after summarizing the typical fact of China’s economic fluctuations. We can estimate the parameters by Bayesian method and get them back to the model to simulate in order to analyze each macroeconomic variable’s fluctuations in each shock’s impacting individually. Then we can analyze the volatility and the importance of each macroeconomic variable by decomposing the three shocks to deeply understand China’s economic fluctuation mechanism in the same time. The third part is the conclusion. This part summarizes the thesis research results and proposes relevant policy suggestions for maintaining a stable economic growth rate and future research direction.We draw the main conclusions through the empirical analysis above is that the important cause of China’s economic fluctuations is wage multiplier, investment multiplier and monetary shock. While China’s economy continues to develop, the volatility of these factors gradually slowing down which led to the volatility of China’s economy has also been eased in the past ten years.Compared with the existing research, innovations in this paper mainly reflect on bringing the production function which match China’s actual situation in the DSGE model framework and integrating application of various tools methods.