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Friedman’s plucking model of business fluctuations suggests that output cannot exceed anupper limit, but it is occasionally “plucked” downward below trends as a result of economicrecessions.This paper investigates China’s business fluctuations using quarterly real GDPdata for the period 1978-2009.Our results show some evidence supporting Friedman’splucking model.We find that a ceiling effect of real output exists, and that negative asymmetricshocks significantly affect the transitory component, which captures the plucking downwardbehavior during the recession.The results also suggest that the basic asymmetric unobservedcomponent model is not appropriate for directly modeling China’s real output because thebusiness cycle is inaccurately measured, but it works quite well when considering a structuralbreak in the second quarter of 1992.The results reveal that although China’s economystrengthened in the second quarter of 2009, it is essential for China’$ government to takefurther positive and effective measures to maintain sustainable development of the economy.
Friedman’s plucking model of business sudden suggests that output can not exceed anupper limit, but it is occasionally “plucked ” below below trends as a result of economicrecessions.This paper investigates China’s business fluctuations using quarterly real GDPdata for the period 1978-2009.Our results show some evidence supporting Friedman’splucking model. We find that a ceiling effect of real output exists, and that negative negativetricshocks significantly affect the transitory component, which captures the plucking downward behavior in the recession. The results also suggest that the basic asymmetric unobservedcomponent model is not suitable for directly modeling China’s real output because the business cycle is inaccurately measured, but it works quite well when considering a structural break in the second quarter of 1992.The results reveal that China’s economystrengthened in the second quarter of 2009, it is essential for China ’$ government to takefurther positiv e and effective measures to maintain sustainable development of the economy.