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ROLE OF ECONOMIC STRUCTURAL ADJUSTMENT FOR LONG‐TERM ECONOMIC STABILITY IN CHINA: ESTIMATION BASED ON VARIANCE DECOMPOSITION
Author(s) -
Fang Hongsheng,
Jin Xiangrong
Publication year - 2010
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.2010.00520.x
Subject(s) - economics , variance (accounting) , term (time) , stability (learning theory) , variance decomposition of forecast errors , decomposition , econometrics , estimation , china , structural stability , computer science , chemistry , engineering , physics , accounting , organic chemistry , management , quantum mechanics , machine learning , structural engineering , political science , law
Based on the variance decomposition method of Eggers and Ioannides, the sources of long‐term stability of the Chinese economy since the mid‐1990s are estimated and the potential influence of structural optimization is predicted. Results show that: (i) the contribution of industrial structural adjustment was a negative 46.38%; and (ii) if the share of the expenditure structure was adjusted to the average level in the early period, the contribution of structural optimization would be approximately 38.25%. Moreover, it is believed that a reasonable economic structure can be achieved only through the implementation of a development strategy that takes comparative advantage into consideration.