Analysis of the relationship between fiscal policy effect and economic cycle fluctuation in China

Analysis of the relationship between fiscal policy effect and economic cycle fluctuation in China


Author: Jin Chunyu,Wang Weiqiang  Journal:Journal of Xi’an Jiaotong University(Social Sciences)  Date:2017(3)

Keywords Fiscal policy; economic cycle; smooth shift vector autoregression model; government expenditure; structural tax reduction;

Abstract

The smooth transition vector autoregressive model, the dynamic characteristics of the effects of fiscal policy in different stages of the economic cycle China were compared. The results show that with the economic cycle fluctuation, the effect of fiscal policy China will change significantly, influence of government spending on private investment in the economic downturn is crowding in effect, and to the economic expansion and the transformation is crowding out effect, thus forming a nonlinear effect, but government spending on output and private consumption does not produce nonlinear effect; tax influence on output, private consumption and private investment is significantly greater than the period of economic expansion in the period of economic recession, and the government tax has nonlinear effects on output and private consumption in the background of the current economic new normal. The government can, through the expansion of fiscal expenditure and structural tax cuts to ensure stable economic growth in the long term, when the need to guard against The adverse effects of government investment and continuing tax cuts.


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