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The Chinese Output Gap During the Reform Period 1978-2002

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  • Jorg Scheibe

Abstract

We estimate potential GDP for China comparing univariate and multivariate methods and derive a quarterly output gap series. For the multivariate, production function based estimates we employ aggregate data and data on five economic subsectors. We estimate production functions in levels as well as an EqCM specification, which we argue is better suited for identifying the long-run share of capital and labour in production. Our output gap estimates improve on earlier work which has so far been used in the emerging literature on macro-modelling of the Chinese economy. Drawing on the literature on Chinese economic growth, productivity measurement, and capital stock construction, we find that across a range of reasonable assumptions for capital and labour data specifications the output gap estimates remain correlated and robust. All our methods show that at the end of 2002 China is entering a period of economic upswing, but the current level of the output gap is much below the previous peaks in 1988/9 and 1994/5.

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  • Jorg Scheibe, 2003. "The Chinese Output Gap During the Reform Period 1978-2002," Economics Series Working Papers 179, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:179
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    Cited by:

    1. Sinclair, Tara M., 2019. "Characteristics and implications of Chinese macroeconomic data revisions," International Journal of Forecasting, Elsevier, vol. 35(3), pages 1108-1117.
    2. Zhang, Chengsi & Murasawa, Yasutomo, 2012. "Multivariate model-based gap measures and a new Phillips curve for China," China Economic Review, Elsevier, vol. 23(1), pages 60-70.
    3. Vines, David & Scheibe, Jörg, 2005. "A Phillips Curve for China," CEPR Discussion Papers 4957, C.E.P.R. Discussion Papers.
    4. Yueqing Jia, 2011. "A New Look at China’s Output Fluctuations: Quarterly GDP Estimation with an Unobserved Components Approach," Working Papers 2011-006, The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting.
    5. GERLACH, Stefan & Peng, Wensheng, 2006. "Output gaps and inflation in Mainland China," China Economic Review, Elsevier, vol. 17(2), pages 210-225.
    6. Paul G. Egan & Anthony J. Leddin, 2016. "Examining Monetary Policy Transmission in the People's Republic of China–Structural Change Models with a Monetary Policy Index," Asian Development Review, MIT Press, vol. 33(1), pages 74-110, March.

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    More about this item

    Keywords

    output gap; growth regressions; EqCM specification of production function; Chinese capital stock data;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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