Associate Prof. ZHU Zixiang from School of Economics, Sichuan University gave a lecture entitled "Macro Effects of Economic Slowdown, Endogenous Technological Progress and Economic Policy Uncertainty".

Abstract:This paper attempts to explain the long-term economic slowdown in China from the perspective of uncertainty, which has been suggested to be caused by supply-side factors. First, the paper estimates monthly output trends and cycle-adjusted total factor productivity (TFP) series for China based on a dynamic factor model. The results show that the slowdown in technological progress is an important cause of China's economic slack in the last decade, while TFP is pro-cyclical. The paper then finds that economic policy uncertainty shocks cause negative deviations in output trends, TFP and output variables, but have positive initial effects on inflation and negative long-run influence, based on an SVAR model with multiple identification methods and data. The paper then constructs a DSGE model incorporating the endogenous growth mechanism, and the fitted results are consistent with the empirical results. In the model, there is a two-way feedback between productivity and economic fluctuations, which amplifies the impact of shocks together with the countercyclical price addition mechanism, forming a supply-side effect of economic policy uncertainty shocks. The paper argues that shocks not only have short-term effects but also affect the long-term trend of the economy; they not only affect the demand side but also the supply side. The government should give countercyclical support to R&D activities to weaken the negative impact of economic policy uncertainty shocks on productivity.