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China’s Fiscal Multiplier and Its State Dependence

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  • Wen Zhang
  • Yangyang Zhang
  • Xinye Zheng
  • Li Zhang

Abstract

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.

Suggested Citation

  • Wen Zhang & Yangyang Zhang & Xinye Zheng & Li Zhang, 2019. "China’s Fiscal Multiplier and Its State Dependence," Manchester School, University of Manchester, vol. 87(2), pages 205-227, March.
  • Handle: RePEc:bla:manchs:v:87:y:2019:i:2:p:205-227
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    File URL: https://doi.org/10.1111/manc.12235
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