Discussion paper

DP10238 A DSGE Model of China

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.


Minford, P (2014), ‘DP10238 A DSGE Model of China‘, CEPR Discussion Paper No. 10238. CEPR Press, Paris & London. https://cepr.org/publications/dp10238