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Title: A DSGE Model of China

Author(s): Li Dai, Patrick Minford and Peng Zhou

Publication Date: November 2014

Keyword(s): Bayesian Inference, China, DSGE and Indirect Inference

Programme Area(s): International Macroeconomics

Abstract: We use available methods for testing macro models to evaluate a model of China over the period from Deng Xiaoping's reforms up until the crisis period. Bayesian ranking methods are heavily influenced by controversial priors on the degree of price/wage rigidity. When the overall models are tested by Likelihood or Indirect Inference methods, the New Keynesian model is rejected in favour of one with a fair-sized competitive product market sector. This model behaves quite a lot more 'flexibly' than the New Keynesian.

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Bibliographic Reference

Dai, L, Minford, P and Zhou, P. 2014. 'A DSGE Model of China'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10238