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Empirical Analysis of the Effect of Fiscal Policy Shocks in China

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  • Ji Jia

    (Chinese Academy of Fiscal Sciences, Beijing, China)

Abstract

The central issues concerning fiscal policy makers include macroeconomic stability and growth stimulation. The policy decision process is facilitated by investigation on the effects of fiscal policy, such as a change in government spending or taxes on macroeconomic variables comprising inflation, aggregate output, and interest rates. Build on the Blanchard-Perotti identification approach, this paper empirically analyses the influence of fiscal policy to aggregate economic activities in China, and the estimated results are compared between China and the advanced economies. The findings demonstrate that the impulse responses incurred by tax shocks are generally stimulative, although government spending shocks tend to be neutral, revealing meaningful implications for the fiscal space and policy design.

Suggested Citation

  • Ji Jia, 2021. "Empirical Analysis of the Effect of Fiscal Policy Shocks in China," Statistics, Politics and Policy, De Gruyter, vol. 12(2), pages 395-412, December.
    • Handle: RePEc:bpj:statpp:v:12:y:2021:i:2:p:395-412:n:12
    DOI: 10.1515/spp-2021-0013
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    Keywords

    counter cyclical policy; impulse response; macroeconomic stabilization;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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