The Study On The Relationship Between Volatility And Growth

After the founding of our country, our country adopted a highly centralized political system and planned economy system, almost all the economic operation is dominated by the government. In the short term, the national economy has been rapidly restored, and embarked on a socialist road, but also inevitably result in huge fluctuation of macro economy, especially during the three years of natural disasters, our country’s economic growth slowed sharply. One of the most tragic happened in1961, GDP per capita was decreased by26.6%. During the Cultural Revolution, our economy has many recessions. Thus, the planned economy system does not eliminate the volatility, but increase thevolatility. After the reform and opening up, our country has carried out the reform of the market economy, macroeconomic risk resistance capacity improved significantly, volatility amplitude was significantly small than before the reform and opening up. Although the economy did not appear negative growth, but the market has a variety of impact from home and abroad.At present, the financial crisis brings a heavy blow to the world economy, in face of insufficient external demand, the outlook of our economy is full of great uncertainty. Recognizing the relationship between economic fluctuation and economic is good to enhancing the ability of the government controlling economic risk. Due to the different data and research methods, the research results about the relationship between economic volatility and economic growth differ. Take this opportunity, I will combine the national conditions of China’s economic transition, using the growth rate of per capita GDP data after the founding of our country to study the relationship between volatility and growth in china.Specifically, the first chapter is an introduction part which introduced the concept of volatility of economy and growth of economy, defined the scope of this study; and combed the literature of relationship between volatility and growth reviewed research status of domestic and overseas from both theoretical and experience analysis. The second chapter is an overview of the theory of volatility and growth. The third chapter is about the characteristics and the fact of Chinese volatility of economy and growth of economy which use China’s annual per capita GDP growth rate data over the years to do the descriptive statistics analysis, and used the HP filter method for processing of China’s annual per capita GDP sequence over the years, obtained China’s economic fluctuated indicators and preliminary worked out China’s economic growth and economic fluctuated situation.The forth chapter is empirical analysis based on the GARCH model,in this chapter, it firstly makes ARMA model on China’s economic growth time series and does ARCH Tests to residual, found the GARCH effect exist, and then used the GARCH model for analysis, worked out a negative relationship between China’s volatility and growth. The fifth chapter is empirical analysis based on VAR Model, in this chapter, it got the economic volatility data by the HP filter method, and then established VAR model for the volatility and growth, and did the impulse response analysis, worked out that China’s volatility of economy has a reverse effect to growth. The sixth chapter is further discussion of the relationship between volatility of investment and volatility of economy, in this chapter, it used the VAR model to explore the dynamic relationship between China’s volatility of investment and volatility of economy. The seventh chapter is the conclusions and policy recommendations which summed up the results of the analysis of the previous chapters, made policy recommendations, that the Government should continue to steadily promote the reform of the market economy system, assure their roles well, reduced the unnecessary intervention on the economy, meanwhile improved own macroeconomic regulation level to prevent surplus macroeconomic fluctuations, and promoted the healthy development of the economy.