A New Estimation Method And Application Of Output Gap Based On Mixed Normal Distribution Unobservable Component Model

The economic cycle is always a research hotspot in macroeconomics.At present,China’s economy is in a critical period of growth rate shifting.The downward pressure on the internal economy is increasing,and the external Sino-US trade war continues to deteriorate.Therefore,study on potential trend and cyclical changes of China’s economy has Theoretical basis and practical significance.This paper first introduces the traditional GDP trend-cycle decomposition model: UC model,URUC model and BN model,and compares their differences and connections.Then the error term of mixed normal distribution is introduced in the trend and cycle components of unobservable component(UC)model respectively,allowing the slope of trend function to change and the potential output to be linearly segmented,in order to clearly identify the important inflection points and the changes in the output gap during the economy operation.Therefore,this paper analyzes the economy operation characteristics of China by using the mixed normal distribution unobservable component(GM-UC)model.Secondly,it applies the GM-UC model to the field of real estate cycle,decomposing the trend and cycle to obtain the output gap of real estate output value.Combined with the house price index and the expected Phillips curve,it analyzes the relationship between real estate output gap and house price index in China since 2005,which is whether to apply the fixed expected Phillips curve or the adaptive expected Phillips curve.Through judging whether there is a risk of “stagflation”in the real estate sector,it provides a certain reference for the government to formulate policies.The research finds that:(1)GM-UC model can automatically identify the change of potential output inflection point,which explains the long-term impact of historical events on China’s economy.And the cycle components obtained by GM-UC model is roughly consistent with that obtained by HP filtering and BP filtering,which solves the controversy of various trend-cycle decomposition models and proves this method has certain advantages to some extent.(2)China’s macro economy generally showed an upward trend in 1992-2018.However,there are two inflection points in the potential output trend component,reflecting the impact of external shocks on China’s economy.The first inflection point is in the second quarter of 1994 and the second is in the second quarter of 2008.(3)In the sample interval,China experienced six complete cycles.Due to the influence of external shocks and policy,the fluctuation range and length of each cycle are not stable.And the cycle fluctuations have gradually weakened since 2011.(4)There is a positive correlation between the house price index and the real estate output gap.With the real estate output gap rose by 1 percentage,the house price index increases by 0.6-0.7percentage.In addition,the real estate economy is confronted with a risk of “stagflation”.The government should strictly control the big fluctuations in the real estate market,and maintain the house price index within a reasonable range to prevent long-term housing prices from overheating and over-tightening.