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China’s Fiscal Multiplier and Its State Dependence
Author(s) -
Zhang Wen,
Zhang Yangyang,
Zheng Xinye,
Zhang Li
Publication year - 2019
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12235
Subject(s) - economics , china , fiscal multiplier , government spending , multiplier (economics) , fiscal policy , macroeconomics , monetary economics , government expenditure , vector autoregression , aggregate demand , structural vector autoregression , public finance , monetary policy , market economy , political science , welfare , law
This paper studies the effects of government spending on China’s output with a threshold structural vector autoregressive model. The empirical findings suggest that increasing government expenditure significantly raises China’s aggregate output. Contrary to the evidence of countercyclical fiscal multipliers in the advanced economies, China’s fiscal multiplier tends to be procyclical, suggesting a novel fiscal policy transmission mechanism in China.