| Abstract | China has entered the economic slowdown “7 era” since 2012. Using the conditional Markov model, we find that, the “7 era” doesn’t change the great moderation, but transfers from the upper to the lower end of the reasonable interval. Great moderation and slowdown are two important stylized facts in the new normal of macroeconomic operation. We establish a TVP-SV-VAR model to investigate to driving factors, and find that: (1) the continuation of the great moderation, is the result of the changes of the impulse and propagation mechanisms of structural shocks. The volatilities of supply shocks and demand shocks decline, and the buffer effect for the shock transmission in economic system is more and more obvious. Such economic self-stabilizing effects are strengthened in the "7 era". (2) The slowdown is the outcome of the decline of potential growth rate and negative external demand shock. The long-term trend of economic growth has led into the downstream channel since 2006, and the accelerated reforms in 2012 slowed down the rate of decline, but not yet realized underpinning. Continued negative cyclical components driven by demand shocks are boosting factors. Micro stimulus policy effected gradually but not yet changed the direction of shocks. For the governance of economic slowdown, the government must speed up structural adjustment, technological innovation and institution reform to smooth and even reverse the downward trend of potential growth rate, and also quickly adjust the fiscal and monetary policy to hedge the negative effect of demand shocks. |