Modeling And Analysis Of Chinese Dynamic Stochastic General Equilibrium By Industries

Under the background of further development economic globalization, accurately understanding and forecasting the future economic situation in our country’s economy are the important bases of our economic policy. DSGE models for policy change and its impact on the economic development provides a reliable approach of analysis. Cosidering the overall evaluation literature as well as the laboratory research basis, linking to our country reality, this article take the financial accelerator effect as a frame, take Zhu, Liu and Wang (2010) CGE model as the foundation, this article construct the Chinese stochastic general equilibrium model by sector. Economic activity will be broken down for42sectors on input-output relations, a unified and clear structure of the model. On the basis of financial accelerator mechanism, this article derives the relationship between the optimal leverage ratio and the interest rate premium, analysing the friction mechanism of financial markets as well as its economic explanation quantitatively. This model embeds the stock market module rarely seen in the traditional DSGE model, making the analysis to be more comprehensive. Under the DSGE framework, the stock market module is more closely in conjunction with macroeconomic. According to the data of our country’s economic developments by sector in2011, this article compiles the underlying data required in the DSGE mode to calculate model parameters, combining with historical data to estimate the accuracy of the model. This article provides a notable degree of disaggregation on the production side, explicitly distinguishing between investments and consumption, the real economy and the virtual economy as well as their connections. Through the summary of large-scale DSGE characteristic, making improvement to the general DSGE model, this DSGE model established has been suitable for the analysis of enterprise production performance and the stock market dynamic. This article establishes the DSGE system with42sectors of the economy, distinguishing between the real economy and the virtual economy, commercial banks, central banks and the government, making the general equilibrium model more complete.Key point of this article is the establishment the Chinese DSGE model by sector containing the securities dynamics. In accordance with the general structure for dynamic equilibrium models, product supply, demand for capital, labor demand, domestic demand and imports, income, prices, government revenue, dynamics of central bank and securities dynamics are modeled respectively, solving by linearization method. This article uses the matlab development environment and the database completing the Chinese DSGE model is Microsoft Access.The simulation suggests that, by analysis of the initial capital stock gap of the4th quarter in2011, the capital stock of China’s main industry is still faced with significant negative gap, in which the gap in the manufactory industry is more than10%, implying great future capital growth potentiality. To be specific, of which the capital stock negative gap is bigger than20%is the financial industry, the wholesale and the retail trade, the nonmetalliferous ore selection industry and the real estate industry. The obvious gap of profit margin is in the financial sector,22%higher than the equilibrium value. The gap in wholesale and retail trade, construction and real estate have been close to10%. The health, the social security and the social welfare industry and the education industry profit margin negative gap is obvious, already approached-10%. The capital stock in last period has a significant effect on the capital stock in current, in which, the most obvious effect can be found in financial industry, construction, real estate, wholesale and retail trade as well as accommodation, food and beverage industry, reflecting its long-cycle characteristics.From2012to2013, China’s overall economic trends run smooth, maintaining steady economic growth, increasing personal income while the stock market has significantly warmed up again. Capital stock will expand, combined with rising wages, increasing net asset and consumption. In terms of the interest rate issue, the possibility of reducing it is low while the capability of prudent monetary policy is also small. By analyzing the data in2011, this article gives the appropriate investment recommendations.