Credit and fiscal multipliers in China
Chen, Sophia; Ratnovski, Lev; Tsai, Pi-Han (28.02.2019)
Numero
5/2019Julkaisija
Bank of Finland
2019
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:bof-201903011076Tiivistelmä
We estimate credit and fiscal multipliers in China, using subnational political cycles as a source of exogenous variation. The tenure of the provincial party secretary, interacted with the credit and fiscal expenditure used in other provinces, instruments for provincial credit and government expenditure growth. We find a fiscal multiplier of 0.75 in 2001-2008, which increased to 1.2 in 2010-2015, consistent with higher multipliers in a slower economy. At the same time, a credit multiplier of 0.2 in 2001-2008 declined to close to zero in 2010-2015, consistent with credit saturation and credit misallocation. Our results suggest that credit expansion cannot further support economic growth in China. The flip side is that lower credit growth is also unlikely to disrupt output growth. Fiscal policy is powerful, and can cushion the macroeconomic adjustment to lower credit intensity.
Sisällysluettelo
Abstract 4
I Introduction 5
II Data and method 9
III Results 11
A Credit and fiscal multipliers 11
B The evolution of the multipliers 12
C Provincial heterogeneity 13
D Industry effects 14
IV Discussion 15
A Measurement issues 15
Credit 15
Off-budget expenditure 15
Provincial data 16
B Non-random political appointments 16
C “Open economy multipliers” 17
V Conclusion 18
Figures and tables 19
References 30
I Introduction 5
II Data and method 9
III Results 11
A Credit and fiscal multipliers 11
B The evolution of the multipliers 12
C Provincial heterogeneity 13
D Industry effects 14
IV Discussion 15
A Measurement issues 15
Credit 15
Off-budget expenditure 15
Provincial data 16
B Non-random political appointments 16
C “Open economy multipliers” 17
V Conclusion 18
Figures and tables 19
References 30
Julkaisuhuomautus
Published in Journal of International Money and Finance
Volume 119, December 2021, Article 102481 https://doi.org/10.1016/j.jimonfin.2021.102481
Volume 119, December 2021, Article 102481 https://doi.org/10.1016/j.jimonfin.2021.102481