Building original series of physical capital stocks for China's economy methodological problems, proposals for solutions and a new database

Spurious OLS Estimators of Detrending Method by Adding a Linear Trend in Difference-Stationary Processes—A Mathematical Proof and Its Verification by Simulation

“…Even if their effectiveness is questioned, especially because of the sensitivity of the choice of the truncation parameters, we recommend using unit root tests to reduce the risk of inappropriately selecting the detrending method, but by regressing the variables of the models used in the first differences of the logarithm forms when such tests show that they contain unit roots (such an advice has been applied in a recent study on China's long-run growth using a new time-series database of capital stocks from 1952 to 2014 built through an original methodology. See Herrera (2015, 2016) [26,27]). From a theoretical point of view, regressions in the first differences of the logarithm forms are acceptable both by neoclassic and Keynesian modeling, in which they can easily be interpreted in terms of growth-rate dynamics; and from an econometric point of view, logarithms might be useful when a problem of heteroscedasticity appears, while difference operators can help to avoid spurious regressions if there are unit roots.…”

Research on China's Environmental Governance Mode: Quality Driven or Quantity Driven?

“…The calculation of the capital depreciation rate is the main issue for measuring capital stock. At present, the main methods for calculating the depreciation rate include assuming the depreciation rate (Wu, 2000;Wang and Yao, 2003), estimating the depreciation rate by using the depreciation amount (Escribá-Pérez et al, 2018;Amir-ud-Din et al, 2019), econometric analysis (Hernández and Mauleón, 2005;Ning and Diewert, 2011) and the relative efficiency method (Zhang, 2008;Wu et al, 2014;Long and Herrera, 2016). However, the objectivity of assuming the depreciation rate method is poor, which can easily lead to "expected self-realization."…”

Monetary stimulus policy in China: The bank credit channel

“…The model period is set to be one quarter. 23 We set the discount factor f for both SOEs and PEs to 0.98, which is smaller than so that …rms are borrowers in the equilibrium. Relative utility weight of labour is set to 28:3 so that the aggregate labour hours equals to 1=3.…”

“…The elasticity of demand for intermediate goods # is set to 11, implying that the steady-state mark-up ratio is about 10 percent, which is quite close to the value used in Chang et al (2019). The loan-to-value ratio is set to 0:7 for the SOE sector and 0:3 for the PE sector respectively, implying that 56 percent of the 23 Our choice is close to that calculated from the data in Wind; the average annual deposit rate measured as the one-year regulated deposit rate is 1:028 by using data in Wind over the same period. Song, Storesletten and Zilibotti (2011) report a slightly lower value of 1:0175 when they focus on the period from 1998-2005.…”