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The threshold impact of fiscal disaster relief expenditure on economic growth: Evidence from China

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  • Gnahe, Franck Edouard

Abstract

This work employs a stochastic general equilibrium model to examine the theoretical link between the magnitude of government fiscal disaster relief spending and economic growth. This paper employs a dynamic panel threshold model to investigate the optimal magnitude of government fiscal catastrophe relief expenditures. The numerical simulation findings indicate that the magnitude of moderate government financial disaster relief expenditures is strongly correlated with the frequency of natural catastrophes. The extent of government financial catastrophe relief expenditure has an "inverted U-shaped" correlation with economic development. The empirical findings indicate a clear nonlinear correlation between the magnitude of government financial disaster relief expenditures and economic growth. The escalation will foster economic expansion, but when government fiscal disaster relief spending is over the threshold, the correlation between the magnitude of such expenditure and economic growth may invert.

Suggested Citation

  • Gnahe, Franck Edouard, 2025. "The threshold impact of fiscal disaster relief expenditure on economic growth: Evidence from China," Research in Economics, Elsevier, vol. 79(4).
    • Handle: RePEc:eee:reecon:v:79:y:2025:i:4:s1090944325000535
    DOI: 10.1016/j.rie.2025.101076
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    Keywords

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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