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Local government expenditure, RBC model and regional business cycle in China¡ªTake Tianjin for example

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  • YANG Guang

    (School of Economics, Nankai University, Tianjin 300071, China)

Abstract

In this paper, the actual economy in Tianjin Municipal city are simulated with RBC model through introducing local government expenditure. From the works review and stylized facts, it is easy to find that government expenditure will have important influence on economy. Then this paper provides new evidence to support this judgment by DCC theory. After concluding the stylized facts of Tianjin city, a regional RBC model with local government expenditure is developed. Next, this paper starts to solve this RBC model, get log-linearization of the solution and estimate all parameters. A program on Matlab is made to simulate actual economy in Tianjin city with this RBC model. The result is the RBC model with local government expenditure has better performance than that without local government expenditure. Therefore, it will be necessary to consider local government expenditure, if regional economy is researched.

Suggested Citation

  • YANG Guang, 2009. "Local government expenditure, RBC model and regional business cycle in China¡ªTake Tianjin for example," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 4(4), pages 588-600, December.
    • Handle: RePEc:fec:journl:v:4:y:2009:i:4:p:588-600
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-009-0031-2
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    More about this item

    Keywords

    local government expenditure; regional business cycle; RBC model;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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