How Large Will Be the Effect of China's Fiscal-Stimulus Package on Output and Employment?

Dong He, Zhiwei Zhang and Wenlang Zhang
Additional contact information
Wenlang Zhang: Research Department, Hong Kong Monetary Authority

No 905, Working Papers from Hong Kong Monetary Authority

Abstract: This paper studies the effects of the fiscal-stimulus package in Mainland China on its output and employment. Using the input-output table as the analytical framework, we argue that the aggregate effect on output and employment of a given amount of fiscal spending depends on the distribution of such spending across different economic sectors. We estimate that the announced fiscal spending of RMB2 trillion yuan in 2009 could lead to a direct increase in output of RMB1.7 trillion yuan, implying a fiscal multiplier of around 0.84 in the short-run, and could potentially generate 18 million to 20 million new jobs in non-farming sectors. We further argue that the size of the fiscal multiplier also depends on the cyclical conditions of the economy and the policy environment, which we simulate using a dynamic structural model. Model results show that the fiscal multiplier in the medium run is around 1.1 as government fiscal spending leads to higher household consumption and corporate investment, which will take time to fully materialise.

Keywords: Fiscal policy; Input-output table; Multiplier; Employment coefficient (search for similar items in EconPapers)
JEL-codes: E2 H5 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2009-03
New Economics Papers: this item is included in nep-cna, nep-mac and nep-tra
References: Add references at CitEc
Citations: View citations in EconPapers (37)

Downloads: (external link)
http://www.info.gov.hk/hkma/eng/research/working/pdf/HKMAWP09_05_full.pdf (application/pdf)

Related works:
Journal Article: HOW LARGE WILL BE THE EFFECT OF CHINA'S FISCAL STIMULUS PACKAGE ON OUTPUT AND EMPLOYMENT? (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hkg:wpaper:0905

Access Statistics for this paper

More papers in Working Papers from Hong Kong Monetary Authority Contact information at EDIRC.
Bibliographic data for series maintained by Simon Chan ( this e-mail address is bad, please contact ).