Credit and Fiscal Multipliers in China

By Sophia Chen, Lev Ratnovski, Pi-Han Tsai

December 12, 2017

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Sophia Chen, Lev Ratnovski, and Pi-Han Tsai. Credit and Fiscal Multipliers in China, (USA: International Monetary Fund, 2017) accessed November 23, 2024

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.

Subject: Bank credit, Credit, Expenditure, Fiscal multipliers, Fiscal policy, Fiscal stimulus, Money

Keywords: Bank credit, China, Credit, Credit Growth, Credit multiplier, Fiscal multipliers, Fiscal Stimulus, Global, Macroprudential Policy, Multiplier, Multipliers, On-balance-sheet expenditure multiplier, On-balance-sheet multiplier, Open economy multiplier, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/273
Stock No:

WPIEA2017273
ISBN:

9781484332160
ISSN:

1018-5941

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