Abstract
China′s economic cycles in the past 35-plus years have been driven by an endogenous investment cycle. According to an investment-cycle hypothesis for centrally planned economies, investment fluctuates because its growth rate responds inversely, with delay, to the degree of tautness in the economy′s supply capacity. In this paper′s macroeconomic model, the investment cycle is generated by a two-way dependency between state fixed investment and the magnitude of inflationary pressure. The estimated coefficients of structural equations and the simulation result suggest the presence of such an endogenous investment cycle in China. J. Comp. Econom., October 1994, 19(2), pp. 188-216. Harvard University, Cambridge, Massachusetts 02138.
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