The Empirical Study Of China’s Fiscal Policy Volatility On Economic Growth

The relationship between fiscal policy volatility and economic growth is relatively a forward subject. Whether deeply understanding the effect of short-run volatility on long-run growth, or evaluating the economic effect of fiscal policy, it is significant meaningful to study the relationship between fiscal policy volatility and economic growth. More and more foreign scholars discuss the relationship and get various conclusions. Because the relationship may depend on marketing environmet, and because the above conclusions may not be suitable for our country, it is important to study it aiming at our concrete country. So far, there is little literature about it, this paper tries to have something to contribute.The purpose of this paper is to study the effect of China’s fiscal policy volatility on economic growth, in addition, to observe the provincial characteristics would how to affect the effect. In order to help understand the relationship, this paper at first summarizes the related literature and discusses the meaning and measures of volatility. Second, after choosing the appropriate measure, it comes to give statistical description of the periodicity and volatility of fiscal policy and economic growth by using provincial panel data since the tax system reform. Last, this paper uses two kinds of data forms to evaluate the effect of fiscal policy volatility on economic growth:(1) using three-year phase data to study fiscal policy overall volatility on economic growth;(2) introducing virtual variable, using annual data to study the different influence of fiscal policy volatility in different direcions on economic growth.The measure results of fiscal policy periodicity and volatility show:(1) Since the tax reform, the counter-cyclical characteristic of national fiscal expenditure is highly significant, the periodicity of local government expenditure is unconspicuous. About the strength of local government expenditure countercyclicality, the strongest region is the eastern, then the midland, last the western;(2) The pro-cyclical characteristic of national fiscal levy is indistinctive, the strength of local government taxation procyclicality is stronger, the strongest region is the western, then the midland and last the eastern.(3) About the strength of local government expenditure volatility, the strongest region is the western, then the midland and last the eastern. About the local government taxation volatility, the strongest region is the eastern.The empirical results of this paper show:(1) The regressions of three-year phase data find that government expenditure overall volatility and government taxation overall volatility have negative effects on economic growth indistinctively, especially the midwest area;(2) The regressions of annual data find that government expenditure volatility upward has negative effect on economic growth significantly, especially the eastern area; Aslo government expenditure volatility downward has negative effect on economic growth significantly; government taxation volatility upward has negative effect on economic growth indistinctively, especially the midwest area; however, government taxation volatility downward has positive effect on economic growth significantly, especially the midwest area.Based on the result, the government shoud treat the fiscal policy volatility rationally, understand the negative or positive effect on economic correctly.