The Analysis Of Trends And Cycles In Chinese GDP From The Perspective Of Structural Change

No country's economic growth rate can be remained at a fixed level.Influenced by various external shocks,for example,objective economic laws,macro policies,natural disasters and the international financial crisis,the economic growth is usually accompanied by cyclical fluctuations.In its current development stage,the structural contradiction of China is prominent.And China has to deal simultaneously with the slowdown in economic growth,make difficult structural adjustments and absorb the effects of the previous economic stimulus policies.As we can see,China faces the powerful economic downward pressure and the periodical decline in its growth rate is significant.The economic growth rate of 2015 was 6.9%,which was in the lowest level in the past 25 years.To make things worse,GDP's growth rate in the first and second quarter of 2016 declined again,both of which were 6.7%.Under this background,it is of great theoretical and practical significance to study the change of trend and to analysis the cyclical fluctuation's characteristics of GDP.It's also conducive to understand new characteristics of China's potential output and output gap.Also,it is benefit to understand macro policies and macro-control policies direction of government during the 13th five-year plan.Faced downward pressures,how to reasonably decompose the GDP sequence into the trend components,cycle components,seasonal ingredients and irregular components and then study the change of trend and cyclical fluctuations are particularly essential.On the one hand,which method should we choose to obtain trend and cycle components has been the focus of academic controversy.On the other hand,traditional decomposition methods such as the unobservable component model(UC model)method,filtering method,rarely assume that GDP's components have structural changes.Taking into account the impact of various exogenous shocks and frequent macroeconomic policies,the cumulative impact of these anomalies was bound to have an impact on trend and irregular components.So it is necessary to analyze whether the component of GDP underwent structural changes.So we chose the improved UC model in which the random disturbance of the trend's slope and the irregular component are subject to the mixed Gauss distribution to describe the impact of anomalies and structural changes.Unlike the research before,by using the Bayesian estimation which based on Gibbs sampling algorithm,we finally obtained trend components and cycle components of the improved UC model(MUC model).Then we compared the outcome with the result of ordinary unobservable model(UC model)and studied new characteristics of trend components and cycle components.Finally,main conclusions of this paper are as follows:Firstly,except for some small discrepancies,the potential economic growth rate of MUC model is consistent with the UC model's,which points out that China's potential economic growth rate is slow down.Compared with the general UC model,the change of the potential economic growth rate of MUC model is gentler.Secondly,the quarterly growth rate of potential output in the sample period changes more greatly.Influenced by some important events,the high volatility of trend's slope happens in some certain years.It is important to note that the probability of structural change in the slope in the fourth quarter of 2011 is small.But combining with the economic status from 2011 to 2015,economic growth was significantly declined and it presented a longer low"L" path,which means that China's potential growth levels may indeed undergo a structural change in the 2011 and reflects that China's economy entered into the new normal of medium-high-level growth.What's more,different from potential output,phenomenon of positive and negative alternating of cycle is frequent and the cycle duration is short.Affected by frequent random shocks,the cyclical fluctuation is asymmetry.Then,cycle fluctuations of MUC model are bigger.In period of peaks and troughs,two models differ obviously.Last but not least,irregular components fluctuate violently in some time,which shows that in the process of economic development,China suffered much abnormal shocks.In conclusion,the potential output and the output gap obtained by MUC model are reliable and reasonable,which can provide some reference for the analysis of China's economic growth and fluctuations.The innovation of this paper is using the MUC model in which the random disturbance of the trend's slope and irregular components are subject to the mixed Gauss distribution.And the model is estimated by Bayesian estimation based on Gibbs sampling algorithm.Domestic research in this area is still in the blank.