Author(s)

Jiahao Jiang

Corresponding Author

Jiahao Jiang

ABSTRACT

This paper provides detailed analysis of growth asymmetries of two sectors in China, private firms and state-owned firms. I examine the effects of three exogenous shocks on Chinese macro economy. The productivity shock to one certain sector will increase its production but decrease the production of the other sector. The final output increases for the shock to private firms and decreases for the shock to state-owned firms since Chinese private firms hire more people and produce more goods. The collateral constraint shock to the sector of state-owned firms increases its debt and reduce the debt of the sector of private firms. These difference between sectors can be explained by resource misallocation between two sectors.

KEYWORDS

China; DSGE; Two Sectors; Growth Asymmetries