## Credit and Fiscal Multipliers in China

_IMF Working Papers, December 12, 2017_

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## Bibliographic details
- Authors: Sophia Chen, Lev Ratnovski, Pi-Han Tsai
- Published: December 12, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484332160.001

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### Summary findings
- Joint estimation of credit and fiscal multipliers for China over 2001-2015.
- Estimated fiscal multiplier: 0.8 (2001-2015).
- Estimated credit multiplier: 0.2 (2001-2015).
- Conclusion: Reducing credit growth in China is unlikely to disrupt output growth, whereas fiscal policy may be effective in supporting macroeconomic adjustment.

### Time variation of multipliers
- Fiscal multiplier has increased over time:
  - 0.75 in 2001-2008.
  - 1.4 in 2010-2015.
- Credit multiplier has declined over time:
  - 0.17 in 2001-2008.
  - 0 in 2010-2015.

### Methodology
- Instruments: tenure of the provincial party secretary interacted with the type of stimulus used in other provinces.
- Purpose of instruments: obtain separate instruments for provincial credit and government expenditure.

### Policy implications
- Fiscal policy:
  - Given the increase in the fiscal multiplier (from 0.75 to 1.4), fiscal policy may be effective in supporting macroeconomic adjustment.
- Credit policy:
  - Given the decline of the credit multiplier to zero by 2010-2015, reducing credit growth is unlikely to disrupt output growth.

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## Content in this bundle

- **Credit and Fiscal Multipliers in China, WP/17/273, December 2017**
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_Source: https://www.imf.org/en/publications/wp/issues/2017/12/12/credit-and-fiscal-multipliers-in-china-45460_