The Dynamic Relationship between China’s Economic Cycle, Government Debt, and Economic Policy

Yifu Yang, Sheng Zhang, Nannan Zhang, Zuhui Wen, Qihao Zhang, Meng Xu, Yingfan Zhang and Muchuan Niu
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Yifu Yang: School of Economics, Shanghai University, Shanghai 200444, China
Sheng Zhang: School of Environment, Tsinghua University, Beijing 100190, China
Nannan Zhang: School of Marxism, Party School of the Central Committee of C.P.C, Beijing 100091, China
Zuhui Wen: School of Environment & Natural Resources, Renmin University of China, Beijing 100872, China
Qihao Zhang: School of Environment & Natural Resources, Renmin University of China, Beijing 100872, China
Meng Xu: Department of Mathematics, School of Science, Beijing Jiaotong University, Beijing 100044, China
Yingfan Zhang: People’s Court of Fengtai District, Beijing 100161, China
Muchuan Niu: School of Environment & Natural Resources, Renmin University of China, Beijing 100872, China

Sustainability, 2022, vol. 14, issue 2, 1-14

Abstract: Economic growth is an integral part of the Sustainable Development Goals (SDGs), especially SDG 8. We combine 10 economic constraints and build a five-variable (structural vector autoregressive) SVAR model based on China’s time series data of 1978–2017. The empirical results show: (1) The Chinese government adopted different economic policies at different stages of reform and opening up; (2) From the impulse response results, China’s excessively high government debt ratio has begun to inhibit economic growth; (3) In terms of policy selection and coordination, the Chinese government mostly adopts a “discretion” adjustment strategy. In most cases, the fiscal and monetary policies were in the same direction, and the “double expansionary” and “double contractionary” policy coordination may become mainstream; (4) The results of variance decomposition showed that both fiscal and monetary policies can effectively regulate economic growth at the present stage, and the contribution rates of exogenous shocks to the prediction variance of economic growth rate were about 25%.

Keywords: economic policy; government debt; economic cycle; SVAR model (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:14:y:2022:i:2:p:1029-:d:726733

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