 Great recession, exports crunch, and China's fiscal stimulus in a global zero lower bound environmentFernando Garcia-Barragan and Guangling Liu Journal of Asian Economics, 2021, vol. 75, issue C Abstract: This paper develops an open economy model and replicates the exports crunch occurred in China during the 2007–2008 financial crisis. We show that in a global zero lower bond (ZLB) environment, fiscal stimulus significantly mitigates the negative effects of exports crunch during the Great Recession. In a global ZLB environment, fiscal stimulus produces more or less the same multiplier as during normal times, which are both greater than one. The state-owned enterprises’ production channel produces a spill-over effect on the private-owned enterprises’ production and amplifies the multiplier effects of fiscal stimulus. Implementation delay enhances the multiplier effects of fiscal stimulus. Compared to normal times, the welfare gain associated with fiscal stimulus in a global ZLB environment increases significantly, whereby implementation delay slightly weakens this welfare enhancement. Keywords: Fiscal multiplier; Government investment; Great Recession; Zero lower bound; Emerging market economies; Chinese economy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:75:y:2021:i:c:s104900782100052x DOI: 10.1016/j.asieco.2021.101323 Access Statistics for this article Journal of Asian Economics is currently edited by C. Wiemer More articles in Journal of Asian Economics from Elsevier |
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