The Dynamic Impact Of Changes In Terms Of Trade On Chinese Macroeconomic Cycle

With the development of economic globalization,international trade has become an important driver of economic development in all countries.As an important concept in international trade,the terms of trade will inevitably be transmitted to the domestic market through various paths,thus affecting the country's macroeconomic operations.Therefore,this paper selects China's annual statistical data from 1980 to 2016 in order to analyze the dynamic impact of changes in Chinese terms of trade on the macroeconomic cycle,explore the importance of terms of trade in macroeconomic operations,and propose relevant policy recommendations.This paper first summarizes domestic and foreign research results on trade conditions and economic cycles.Based on this,I select GDP,consumption,and capital as the core variables of the macroeconomic cycle,and construct SVAR models together with terms of trade to conduct empirical analysis.The impulse response of the model variables was analyzed to analyze the inter-period dynamic impact of the terms of trade shocks.Then the variance contribution of terms of trade shocks to the macroeconomic variables'forecasting variance was analyzed using variance decomposition.In addition,this paper expands the model's endogenous variables,and adds the relevant variables of fiscal policy and monetary policy in the model.Using impulse response and variance decomposition,I explored whether the dynamic impact of terms of trade shocks on the macroeconomic cycle has changed under different economic policies.The empirical study finds that:Firstly,the impact of terms of trade has a negative effect on Chinese macroeconomic cycle in the short term.Judging from the results of the impulse response,given a unit of positive terms of trade shocks,the variables representing macroeconomic operations all show different degrees of negative reactions in the short term.Secondly,the impact of terms of trade shocks on the forecast variance of the economic cycle variables is not high,but it is still important.According to the variance decomposition,the forecast variances of GDP,consumption,and capital are mainly affected by their own shocks,while the contribution rates of trade condition shocks are 5.34%,11.77%,and 5.25%,respectively.Compared with the impact of GDP,consumption,and capital,the contribution rate of trade conditional impact is not high.While the macroeconomic volume is huge,and the importance of terms of trade impact on the economic cycle cannot be ignored.Thirdly,both fiscal and monetary policies help slow the dynamic impact of the terms of trade shocks on the macroeconomic cycle.From the perspective of the impulse response,after adding the policy variables to the model,the response of GDP,consumption and capital to the terms of trade shocks will weaken in the short-term and the duration of the impact will be shortened.From the perspective of variance decomposition,after the fiscal policy was added,the contribution of the terms of trade to the forecast variance of GDP,consumption,and capital dropped by 2.53%,5.50%,and 3.93%,respectively.After the monetary policy was added,the contribution rate dropped by 3.74%,4.48%and 4.76%,respectively.The results of the study indicate that changes in terms of trade have important implications for the macroeconomic cycle.Therefore,we should pay attention to the terms of trade,regard it as the key monitoring target of Chinese foreign trade,and take corresponding measures to change the long-term deterioration of China's terms of trade and prevent severe fluctuations in terms of trade.In addition,the government can also make full use of macroeconomic policies,such as monetary and fiscal policies,to mitigate the adverse effects of the macroeconomic cycle affected by the terms of trade shocks.