Abstract

The considerable divergence in analyzing the relationship between business cycle volatility and economic growth calls for thorough empirical investigations, but according to the relationship between business cycle volatility and economic growth, foreign experience study did not get uniform results and the experience of the domestic research, less likely. This study attempts to make further test by constructing GARCH-M model with Chinese data from 1952 to 2012 and take the method of maximum likelihood to discuss the relationship between business cycle volatility and economic growth. The result, which is significant statistically, shows that business cycle volatility and economic growth in China is negatively correlated. Therefore, business cycle volatility will bring indirect welfare cost to the residents by decreasing economic growth rate. Stabilization policy will both suppress business cycle volatility and increase economic growth rate.

Keywords:

Business cycle volatility, economic growth, GARCH-M model,

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Competing interests

The authors have no competing interests.

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