Volatility and Economic Systems: Evidence from A Large Transitional Economy

Wang, Boqun and Yang, Dennis Tao (2021): Volatility and Economic Systems: Evidence from A Large Transitional Economy.

Abstract

This is the �rst paper to study the role played by economic transition in reducing output volatility. A dramatic decline in aggregate output volatility in China from central planning to market-oriented reforms in the past half century is documented in this paper. The output volatility measured by the standard deviation of real gross domestic product (GDP) growth over the speci�ed rolling windows declined by 73% from 1953-�1977 to 1978�-2008. The sharpest reduction occurred in 1978 when China began to initiate a series of market reforms. Since the inception of these reforms, the volatility continued to decline, dropping more than 30% from 1978-�1994 to 1995�-2008. During the planning period, the co-movements in the provincial output, which re�flected the systemic risks associated with the highly centralized economic and political systems in China, were found to be the primary source of the high output volatility.

• Item Type: MPRA Paper
• Language: English
• Keywords: Output Volatility Moderation, Transitional Economy, China
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; J - Labor and Demographic Economics > J0 - General > J00 - General; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R0 - General > R00 - General

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