A Quantitative Study of Hong Kong's Fiscal Policy
Given the adoption of the linked exchange rate since October 1983, fiscal policy becomes the only measurement for stabilizing the Hong Kong economy. This paper attempts to establish a framework for evaluating the fiscal effect to prevent the abuse of fiscal measures. The empirical study of Jha et al. (2010) revealed the significant negative impact of fiscal effect in Hong Kong, which violates the classical view of fiscal policy. A similar result has been found by adopting another structural vector autoregression (SVAR) model proposed by Ravn et al. (2007). An omission of control variables in the quantitative model is possible. The MSCI AC (All countries) Pacific Index has been introduced as an international block in the SVAR model proposed by Ravn et al. (2007). The fiscal effect becomes positive and standardizes with the previous fiscal studies. The replacement of investment variable in the modified model suggests that positive fiscal innovation does not encounter with the crowding out effect on investment. The estimations for the decomposition policy expenditures indicate that compositional effect exists, and it undermines the fiscal multiplier. The estimations also reveal that the innovation in recurrent expenditure contributes mainly to the fiscal effect. With the persistence and significant impact on output, concentrating on infrastructure expenditure is the recommendation on Hong Kong fiscal policy to maximize the expansionary effect in the short run.
|Date of creation:||30 Aug 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Raffaela Giordano & Sandro Momigliano & Stefano Neri & Roberto Perotti, 2008.
"The effetcs of fiscal policy in Italy: Evidence from a VAR model,"
Temi di discussione (Economic working papers)
656, Bank of Italy, Economic Research and International Relations Area.
- Giordano, Raffaela & Momigliano, Sandro & Neri, Stefano & Perotti, Roberto, 2007. "The effects of fiscal policy in Italy: Evidence from a VAR model," European Journal of Political Economy, Elsevier, vol. 23(3), pages 707-733, September.
- Morten O. Ravn & Stephanie Schmitt-Grohé & Martín Uribe, 2007.
"Explaining the Effects of Government Spending Shocks on Consumption and the Real Exchange Rate,"
NBER Working Papers
13328, National Bureau of Economic Research, Inc.
- Ravn, Morten O & Schmitt-Grohé, Stephanie & Uribe, Martín, 2007. "Explaining the Effects of Government Spending Shocks on Consumption and the Real Exchange Rate," CEPR Discussion Papers 6541, C.E.P.R. Discussion Papers.
- Ethan Ilzetzki & Enrique G. Mendoza & Carlos A. Végh, 2010.
"How Big (Small?) are Fiscal Multipliers?,"
NBER Working Papers
16479, National Bureau of Economic Research, Inc.
- Ethan Ilzetzki & Enrique G. Mendoza & Carlos A. VÃ©gh Gramont, 2011. "How Big (Small?) are Fiscal Multipliers?," IMF Working Papers 11/52, International Monetary Fund.
- Ethan Ilzetzki & Enrique G. Mendoza & Carlos A. Végh, 2010. "How Big (Small?) are Fiscal Multipliers?," CEP Discussion Papers dp1016, Centre for Economic Performance, LSE.
- António AFONSO & Ricardo SOUSA, .
"Fiscal Policy, Housing and Stock Prices,"
- Afonso, António & Sousa, Ricardo M., 2009. "Fiscal policy, housing and stock prices," Working Paper Series 0990, European Central Bank.
- Ricardo M. Sousa & António Afonso, 2008. "Fiscal Policy, Housing and Stock Prices," NIPE Working Papers 21/2008, NIPE - Universidade do Minho.
- António Afonso & Ricardo M. Sousa, 2008. "Fiscal Policy, Housing and Stock Prices," Working Papers Department of Economics 2008/58, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
- Olivier Blanchard & Roberto Perotti, 2002.
"An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 117(4), pages 1329-1368.
- Olivier Blanchard & Roberto Perotti, 1999. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," NBER Working Papers 7269, National Bureau of Economic Research, Inc.
- Jha, Shikha & Mallick, Sushanta & Park, Donghyun & Quising, Pilipinas, 2010. "Effectiveness of Countercyclical Fiscal Policy: Time-Series Evidence from Developing Asia," ADB Economics Working Paper Series 211, Asian Development Bank.
- Buckle, Robert A. & Kim, Kunhong & Kirkham, Heather & McLellan, Nathan & Sharma, Jarad, 2007. "A structural VAR business cycle model for a volatile small open economy," Economic Modelling, Elsevier, vol. 24(6), pages 990-1017, November.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:41431. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.