Sustainability of fiscal policy: A DSGE analysis using export tax refunds as an example

This paper investigates export VAT rebates as a fiscal policy instrument by developing a two-country open-economy DSGE model that embeds both a financial accelerator and labor market search-and-matching frictions. The model is used to analyze the transmission channels, marginal effects, and fiscal sustainability of export rebate policies under current structural constraints. In contrast to the existing literature, which largely emphasizes the positive incentive effects of export rebates, this study identifies diminishing effects and clear effectiveness boundaries when resource dependence, financial frictions, and involutionary competition exist. The results show that export VAT rebates operate through three channels—price incentives, financing alleviation, and firm behavioral adjustments—but their effects are not stable. Policy impacts are significantly amplified under moderate frictions, while excessively strong or weak frictions obstruct transmission. High dependence on imported resources leads to “benefit leakage,” weakening terminal price advantages. Moreover, wage bargaining constraints in the labor market and employment choices in the public sector reinforce involutionary competition, preventing rebate gains from being transformed into innovation and capital accumulation, thereby reducing long-term real returns per unit of fiscal cost. Compared with other fiscal instruments, export VAT rebates are characterized by rapid effects, relatively lighter fiscal burdens, and weaker persistence, making them more suitable for short-term stabilization rather than structural guidance. The findings indicate that the effectiveness boundaries of export VAT rebates depend on fiscal balance constraints, financial transmission efficiency, and the degree of alignment with industrial structure.