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Empirical Analysis of Economic Impact of Monetary Policy and Fiscal Policy in China Under Global Uncertainty

Author

Listed:
  • Warattaya Chinnakum

    (Faculty of Economics, Chiang Mai University, Chiang Mai 50200, Thailand)

  • Htwe Ko

    (Faculty of Economics, Chiang Mai University, Chiang Mai 50200, Thailand)

  • Jianming Xie

    (Faculty of Economics, Chiang Mai University, Chiang Mai 50200, Thailand)

  • Minglang Wu

    (Faculty of Economics, Chiang Mai University, Chiang Mai 50200, Thailand)

  • Chukiat Chaiboonsri

    (Faculty of Economics, Chiang Mai University, Chiang Mai 50200, Thailand
    Modern Quantitative Economics Research Center (MQERC), Chiang Mai 50200, Thailand)

Abstract

This study examines how monetary and fiscal policies affect economic growth in China under global economic uncertainty. We estimate a Markov Switching Regression (MSR) model using quarterly data from 1996: Q1 to 2024: Q4. We also apply Bayesian Model Averaging (BMA) to choose the relevant control variables. During expansions, higher policy rates, government revenue, moderate inflation, FDI inflows, and export growth support growth. Government expenditure can crowd out private investment. During recessions, higher policy rates reduce growth. Government expenditure has limited impact, but revenue collection remains growth-supportive. Global uncertainty steadily reduces growth. Government expenditure shows negative effects, which indicates possible crowding out. The findings support that monetary and fiscal policies coordination may sustain long-term growth in China and strengthen the resilience amid global uncertainty. The Impulse response functions (IRFs) from Bayesian Vector Autoregression (BVAR) confirm the persistence and dynamics of policy shocks under global uncertainty. This study adds to the empirical literature on the role of macroeconomic policies in shaping economic growth in the case of China.

Suggested Citation

  • Warattaya Chinnakum & Htwe Ko & Jianming Xie & Minglang Wu & Chukiat Chaiboonsri, 2025. "Empirical Analysis of Economic Impact of Monetary Policy and Fiscal Policy in China Under Global Uncertainty," IJFS, MDPI, vol. 13(4), pages 1-18, October.
    • Handle: RePEc:gam:jijfss:v:13:y:2025:i:4:p:196-:d:1775090
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    References listed on IDEAS

    as
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