Calculation Of China’s Fiscal Expenditure Multiplier And Its Policy Effect Analysis

Fiscal policy is an important policy that affects the operation of the national economy and is a necessary measure taken by the state to stabilize the economy,promote consumption,employment and other factors.The question of whether the implementation of fiscal policy is effective is still a topic with no definite conclusion in theoretical circles,Keynesianism believes that fiscal policy is effective,while the neoclassical macroeconomic school that emerged later believes that fiscal policy is ineffective from the perspective of rational expectations.Although the effectiveness of fiscal policy is not clearly defined in theory,it is used more frequently in the actual regulation and control of the economy.At the Central Economic Conference in2021,the state stressed that it will continue to promote active fiscal policy and prudent monetary policy,especially in recent years,the impact of the epidemic and the fluctuations of the international economy,which has enabled China to accelerate the progress of fiscal expenditure,and to drive consumption and promote economic development by increasing government expenditure.In addition to the use of fiscal expenditure,the government will also support a prudent monetary policy and other related measures to promote the steady development of the economy,so the implementation effect of China’s fiscal policy and the impact of other policy changes on it is a very important and valuable research topic.At present,research on the effect of fiscal policy mainly focuses on two aspects: fiscal expenditure and revenue.According to China’s past policy practice experience,the use of fiscal expenditure is more frequent and the effect is more obvious.Especially in recent years,the Chinese government has emphasized the need to ensure the intensity of the use of fiscal expenditure,so this paper mainly takes fiscal expenditure as the key point of research,fiscal expenditure mainly includes government consumption and government investment,government consumption expenditure mainly focuses on public service expenditure for the public,which is an important part of total social consumption;government investment expenditure mainly focuses on infrastructure and other aspects of investment,investment scale,duration.There are also differences in the impact of these two different types of spending on the economy.In addition to the general study of the effect of fiscal expenditure,since the subprime mortgage crisis,the economies of Western countries have fallen into the nether boundary of zero interest rates,and the effect of implementing fiscal policy under different interest rate elasticity has also begun to become a key issue in domestic and foreign research.Keynesian theory holds that when nominal interest rates fall to a level that tends to the lower zero limit,the effects of fiscal policy become more pronounced and the multiplier of fiscal spending becomes larger.In China,the reform of interest rate marketization is also gradually deepening.Before the interest rate did not start to be marketized,China’s interest rate is basically stipulated by the state,the level of interest rate belongs to a relatively fixed state,in recent years,with the advancement of interest rate marketization,the elasticity of interest rates has increased significantly,and the change in the effect of fiscal policy in the state of flexible interest rate is an important issue worth studying.This paper mainly obtains the impulse response map of various economic variables to fiscal expenditure through the "symbolic constraint SVAR" model and calculates the fiscal expenditure multiplier,so as to analyze the effect of fiscal policy in detail.Among them,the two methods of Resolution and penalty function in the symbolic constraint recognition method are used to calculate,and the analysis of the fiscal effect is mainly carried out from the following three different angles:(1)the model is used to analyze the fiscal expenditure,government consumption and investment expenditure,and the impulse response map is obtained in two ways,and then the expenditure multiplier and the cumulative expenditure multiplier are calculated according to the response value.The results show that fiscal expenditure has a certain effect in the early stage,and then the degree of impact on the economy gradually decreases,but the results calculated by different model methods vary to varying degrees.For government consumption expenditure,the short-term multiplier reaches its maximum in the seventh period,and the maximum multipliers obtained using The Effection and penalty functions are 4.178 and 1.366,respectively.Its long-term cumulative multiplier value is less than 1 for the next four years,indicating that government consumption has a greater impact on the economy in the short term.The investment spending multiplier is generally smaller than the government consumption multiplier,but the impact on the economy is more durable.Overall,neither the cumulative multiplier of government consumption nor government investment is greater than 1,indicating that the economic role of fiscal spending is limited in the long term;(ii)analyzing the differences in the effect of fiscal policy under different interest rate states.China’s interest rate marketization continues to advance,the floating nature of interest rates has gradually changed,choose 2008 as a separation point to call the period before the separation point as the fixed interest rate period,the subsequent period is called the floating interest rate period,and then compare the fiscal expenditure multiplier of the two periods,so as to analyze the difference in the effect of fiscal policy before 2008 and after 2008.It confirms the conclusion of the theoretical model: the fiscal multiplier in the fixed-rate period is greater than the fiscal expenditure multiplier in the floating-rate period,and the implementation effect of fiscal policy is more obvious.The selection of2008 as the separation point is based on the characteristics of the data,the reference to relevant literature and the three factors of interest rate marketization policies around 2008;(iii)analysis of whether the impact of fiscal expenditure on output and private consumption is asymmetrical.Using the symbolic constraint characteristics unique to the symbolic constraint model,positive and negative shocks are implemented on fiscal expenditures respectively,and it is found that the impulse response of fiscal expenditure to output and private consumption has the characteristics of asymmetry.In the robustness test part: First,the SVAR model using symbolic constraints lags for three periods and the local projection model calculates the fiscal expenditure multiplier,and the results are basically consistent with the overall trend of the multiplier values obtained above.Secondly,through different models and different SVAR identification methods,the cumulative two-year expenditure multiplier of the two periods before and after 2008 was calculated and compared,and finally the conclusion that the multiplication of fiscal expenditure in the fixed-rate period was greater than the multiplication of fiscal expenditure in the period of floating interest rate;in addition,the PULSE response comparison of 2008,before and after 2008 was also compared with the TVP-VAR model.The results also show that most of the impacts of fiscal expenditure on various variables before 2008 are more volatile than those after 2008,and the impact of fiscal expenditure on the impact is not long-term.