Credit and fiscal multipliers in China: Evidence from a political economy based estimation

Sophia Chen, Lev Ratnovski and Pi-Han Tsai

Journal of International Money and Finance, 2021, vol. 119, issue C

Abstract: We use subnational political cycles as a source of exogenous variation in fiscal and credit policies to jointly estimate the output multipliers of fiscal expenditure and of credit expansion in China. The tenure of the provincial party secretary, interacted with the growth of on-budget fiscal expenditure or credit in peer provinces, instruments for provincial fiscal expenditure and credit. We estimate an on-budget fiscal multiplier of 1.0 and a credit multiplier of 0.2 during 2000–2019. The credit multiplier has decreased since the Global Financial Crisis. Fiscal expenditure has the strongest effect on manufacturing, whereas credit growth has the strongest effect on construction.

Keywords: Credit Growth; Credit Policy; Fiscal Stimulus; Multiplier; China (search for similar items in EconPapers)
JEL-codes: E63 G21 H20 R12 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261560621001327
Full text for ScienceDirect subscribers only

Related works:
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:eee:jimfin:v:119:y:2021:i:c:s0261560621001327

DOI: 10.1016/j.jimonfin.2021.102481

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().