Credit and Fiscal Multipliers in China

Author/Editor:

Sophia Chen ; Lev Ratnovski ; Pi-Han Tsai

Publication Date:

December 12, 2017

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

We jointly estimate credit and fiscal multipliers in China. We use the tenure of the provincial party secretary, interacted with the type of stimulus used in other provinces, to obtain separate instruments for provincial credit and government expenditure. We estimate a fiscal multiplier of 0.8 and a credit multiplier of 0.2 in 2001-2015. The multipliers have changed over time. The fiscal multiplier has increased from 0.75 in 2001-2008 to 1.4 in 2010-2015. The credit multiplier has declined from 0.17 to zero over the same periods. Our results suggest that reducing credit growth in China is unlikely to disrupt output growth, whereas fiscal policy may be effective in supporting macroeconomic adjustment.

Series:

Working Paper No. 17/273

Subject:

English

Publication Date:

December 12, 2017

ISBN/ISSN:

9781484332160/1018-5941

Stock No:

WPIEA2017273

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

26

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