Non-linear Effects F Fiscal Expenditure And Its Structure On Resident Consumption

At present,China has been entering a difficult period of economic transition,while the downward pressure has continued to increase.Therefore the government has put forward a series of expansionary fiscal policy to stimulate the economy.According to the latest data released by the National Bureau of statistics,on the first three quarters of this year,the contribution of the final consumption to GDP is 71 percent.That means there is no doubt that the consumption has become a main driving force of our economic growth.However,the proportion that household consumption could account for GDP is only 37.9%,which is much lower than the same level of other countries.The lack of effective demand and long-term low household consumption rate,not only has weaken the direct simulating impact of consumption on the growth of the economy,but also has reduced investment growth due to a relatively inactive commodity markets.Therefore,in the "new normal "economy,how to use fiscal expenditure correctly to stimulate consumer demand and release the potential of consumption that will be of important practical significance to maintain the rapid growth of our economy.Based on the analysis of the existing research and review of the related theory,this paper demonstrates the non-linear effect which fiscal expenditure and its structure plays on household consumption.Therefore,we could set up a theoretical model to analysis the mechanism of this nonlinear effect by taking a lesson from optimal consumption model and Amano's work(1994).With the annual date from 1978 to 2014,we use MSVAR model to explore these non-linear effects.The results indicate that both the fiscal expenditure and its structure have a significant non-linear effect on household consumption.It can be embodied in:when in regime 1,the total fiscal expenditure has a weak crowd-in effect on household consumption,and the productive expenditure plays a positive role in promoting household consumption while the role of the non-productive expenditure is negative.When in regime 2,the total effect is stronger than it is in regime 1,where both of the productive and the non-productive expenditure crowd in household consumption.Finally,we find out that the causes of these non-linear effects are related to the macro economy and government size.Following these conclusion,we put forward the relevant policy suggestions about how to improve resident consumption.