論文：正向的消費外部性在內生的經濟周期中的作用：在中國的應用

The Role of Positive Consumption E*ternality in Endogenous Business Cycles: The Implication of China
論文：正向的消費外部性在內生的經濟周期中的作用：在中國的應用

Abstract

The government of China has used a special macroeconomic policy, called “Macro-adjustment and control” policy, to smooth the proposed business cycle and to avoid the e*pected recession regularly after 1949. Due to the severely destructive effect of this policy on the national economy, one can e*pect the diminishing of this policy gradually. Since the central government seems, however, to be lack of effective tools, this policy is still adopted while other fiscal and monetary policies have been introduced and carried out in China now.
This paper is to attempt to e*plore the nature of business cycles in China in some way. We modify a synthesized endogenous business cycles model, Francois-Lloyd-Ellis model with the positive consumption e*ternality, to find the possible change of endogenized business cycles in China, without government intervention. By considering the positive consumption e*ternalities in China, which is verified empirically (e.g. Gali, 2001), we find that (1) the length of e*pansion will be longer and stronger and (2) the length of contraction will be shorter and weaker, while keeping their successful e*planations for other facts in the original Francois-Lloyd-Ellis model without the consumption e*ternalities. It implies that if China gives up the “Macro-adjustment and control” policy, the e*pected recession seems not as severe as people e*pected, because of China’s unique characteristic of positive consumption. All of the results will lead to a faster and longer economic growth and smoother
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to smooth the business cycle, while some new methods, such as the interest rates, open market operation, money supply and fiscal policies, are introduced as the tools for intervention[ The reason I think the old method is still the main tool for the Chinese government to intervene the economy is based on the fact that the central government will use its administrative power to stop the fi*ed asset investment of governments at all levels and of other large state-owned enterprises (i.e. SOEs), if it thinks the other new tools are not efficient enough for the short run.]. Such administrative intervention has been proved to be inefficient in the past and seems not suitable for current China establishing the market-oriented economic system. Therefore it could be interesting to understand the possible business cycle in China if there is no administrative intervention and find the suitable methods to smooth it if we can. That is the main purpose of this paper, although our effort is only a small piece of this big project. In fact, we try to show one of unique characteristics Chinese people have could partially smooth the business cycle without any additional government intervention.
From some empirical study (for e*ample, Enricheta Raviva, 2006), most of North Americans and Europeans e*ist the negative consumption e*ternality, while Chinese have the positive consumption e*ternality. The role of consumption e*ternality on business cycle could tell us something we attempt to know.
In this paper we adopt the Francois-Lloyd-Ellis model (2003) to e*amine the effect of the positive consumption e*ternality on the business cycle. We find that comparing the standard Francois-Lloyd-Ellis’ results, that with that the total length of the business cycle does not change much, the length of boom period becomes longer, and the length of the recession period becomes shorter. Moreover, by considering consumption e*ternalities, the business cycles are more likely to happen, i.e. the acyclical equilibrium is less likely to e*ist. The optimal consumption level will be higher due to a higher economic growth rate. Comparing to that standard model without the consumption e*ternalities, the technology growth rate is higher and the length of recession is shorter, which means a smoother growth path. All of these results will lead to a faster and longer economic growth.
This paper will be consisted of the following sections: Section 2 reviews the instructive literature about the economic growth, business cycles, and consumption e*ternality. Section 3 adopts the Francois-Lloyd-Ellis model (2003) to analyze the different effects on economic growth with and without the positive consumption e*ternalities within endogenous economic growth framework. While Section 4 will show the different equilibria, the last section summarizes the conclusion and makes suggestions about the potential research. Some data and figures from China and United States are attached at the end of this paper to verify our results.


2. The Literature Review

Economic growth theory has been a very important topic in the research of economics in the last fifty years. Since technology has been improved at a more rapid rate than ever from the last half of the nineteenth century, the theories of the way of which technology affects the economic growth have been advanced substantially, which is considered as “the engine of economic growth”. The impacts of factors on the economic growth are always at the heart of the study of modern economic growth theory, especially from the mid-1980s, in which the endogenous growth theory emerges and obtains the significant achievement to e*plain the relationship between technology innovation and the economic growth.
On the other hand, the real business cycle (RBC, hereafter) theory is unusually silent now. The reasons for this are discussed in many articles and even in university te*tbooks. They mentioned that one of the main problems is the e*tensions of the model included an e*ogenous growth trend which measures the level of technology, but this trend had no effect on the duration or size of the cycle. And the other shortcoming is the real business cycle theory can not e*plain the effect of the contractions on the employment. The RBC theory can not e*plain the volunteer unemployment in the recession but describe it as the access supply of the labor force. Such problems seem, however, to be solved with the rapid development of the economic growth theory.
Precisely, according to Schumpeter (1934), productivity growth and the business cycles are closely interrelated. There are several possible reasons why business cycles or even recessions may e*ert positive effects on economic growth. One of them is that in the period of recessions, the efficient firms can survive out and the inefficient ones will stop their production because they will lose by using the old technology while the market demand is decreasing. Another one, which is also the more important one, is that during the recession period, the more of the free capital or the skilled labor will be relocated in the R&D sector and their contribution to the new level of technology will add fresh blood to the economic growth in the ne*t booming period.
Furthermore, on the consumer side, the consumption e*ternality is also a very important factor of the optimal economic growth path. Generally, it discusses the effects of consumption e*ternality on many aspects of the economic growth and finds the methods to control these kinds of effects. Consumption e*ternalities have been e*tensively studied in the conte*t of models of jealousy and “keeping up with the Joneses.” For e*ample, Abel (1990) studies the effect of consumption e*ternalities on asset pricing and the eq ……（未完，全文共41661字，當前僅顯示7493字，請閱讀下面提示信息。收藏《論文：正向的消費外部性在內生的經濟周期中的作用：在中國的應用》）