Institutional Constraints, Double Imbalances and Policy Option—Global Financial Crisis and China’s Fiscal Policy

Wei Lü () and Yun Zeng
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Wei Lü: School of Public Finance and Taxation, Dongbei University of Finance and Economics, Dalian 116023, China
Yun Zeng: School of Public Finance and Taxation, Dongbei University of Finance and Economics, Dalian 116023, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2010, vol. 5, issue 4, 640-656

Abstract: With the enormous development of China’s economy, we re-implement the proactive fiscal policy not only to response to the global financial crisis, but also to take advantage of the opportunity to resolve the institutional constraints, transform China’s economic growth pattern, keep stability and promote the sustainable growth of the economy. So the goal of fiscal policy should weigh easing the economic crisis against long-term stability and the development of economy. The past experiences of fiscal policy practices in China indicate that the traditional simple counter-cyclical fiscal policy may be able to pull the economy out of recession, but it has little effect on automatic recovery of the economy. Therefore, the fiscal policies need to hang on the entire reform process and the whole economic structure adjustment. This paper firstly reveals the root of “double imbalances” and institutional constraints, then analyzes the paradox between such constraints, and discusses the space of positive fiscal policy.

Keywords: institutional constraints; external imbalance; internal imbalance; fiscal policy; policy option (search for similar items in EconPapers)
JEL-codes: H21 H3 H4 H73 (search for similar items in EconPapers)
Date: 2010
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