Jinquan Liu;Rundong Chen;Yi Sui;

• 1:School of Economics and Statistics
• 2: Guangzhou University

Abstract：

This paper constructs a high-dimensional Bayesian vector autoregressive(BVAR) model and uses a factor-structured sign restriction approach to identify seven major economic shocks, including domestic demand shocks, domestic supply shocks, foreign demand shocks, foreign supply shocks, financial shocks, fiscal policy shocks, and monetary policy shocks. The paper analyzes the intrinsic characteristics, impact scope, and contributions of these shocks to China's economic cycle fluctuations. The findings are as follows: First, domestic demand and supply shocks have direct impacts on GDP and CPI, while foreign demand shocks primarily affect the Chinese economy through trade channels. The effect of foreign supply shocks on the Chinese economy is minimal, whereas fiscal and monetary policy shocks have more significant effects. Second, financial shocks, particularly real estate price shocks, have the largest impact on variables such as GDP, consumption, and investment, making them the main source of China's economic cycle fluctuations. However, domestic supply and demand shocks also make important contributions. Third, from 2010 to 2019, the moderation of China's economic cycle fluctuations is closely related to the weakening of both internal and external economic shocks. Fourth, the effects of fiscal and monetary policies on output exhibit time-varying characteristics, with both policies effectively stabilizing economic growth in response to significant negative shocks. This study provides a new perspective on understanding the complexity of China's economic cycle fluctuations and their dominant drivers, offers a novel explanation for the phenomenon of “great moderation” in China's economy, and emphasizes the importance of fiscal and monetary policies in smoothing economic volatility.

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Foundation: 国家社会科学基金重大项目“产业升级背景下中国经济周期的特征与形成机制研究”（25&ZD111）;国家社会科学基金一般项目“生产网络视角下宏观经济波动的微观原因与政策应对研究”（24BJL049）;; 广东省学科共建项目“广东省房地产价格趋势走向和区域异化的驱动因素、经济社会效应及政策调控模式选择研究”（GD22XYJ09）的资助

Authors: Jinquan Liu;Rundong Chen;Yi Sui;

References：

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• (1)在本文所有的脉冲响应函数结果分析中,深色实线都是中位数,灰色阴影部分为置信区间。