Credit and Fiscal Multipliers in China

Chen, Sophia; Ratnovski, Lev; Tsai, Pi-Han

doi:10.5089/9781484332160.001

Cited by 8 publications

(3 citation statements)

References 21 publications

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“…The excessive nature of credit expansion has been supported by empirical studies. In a recent IMF working paper, Chen et al (2017) use the tenure of provincial leaders, interacted with credit in other provinces, as exogenous instruments to estimate the effect of credit growth on provincial output, and find that, historically, credit has indeed supported output growth in China. In 2001-08, GDP increased by 2 per cent in response to a 10-percentage-point increase in the ratio of credit to initial GDP.…”

Section: China's Situation: Previous Studies and Recent Developmentsmentioning

confidence: 99%

The non‐linearity between finance and economic growth: a literature review and evidence from China

Gui

2021

Asian-Pac Economic Lit

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The influence of finance on the economy has been shown to be non-linear. When financial development exceeds the needs of the real sector, an economy will face the challenge of 'too much finance', which may generate problems such as rent-seeking, asset price bubbles, or even financial crises. China seems to have followed the 'too much finance' pattern in the most recent decade, during which a fast-expanding financial sector and a slowly growing economy coexisted. The empirical part of this study supports a non-linear (S-shaped) relationship between financial development and GDP per capita; in addition, the two financial development indicators used (total loans and private credit) appear to have opposite effects on economic growth.

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Section: China's Situation: Previous Studies and Recent Developmentsmentioning

confidence: 99%

The non‐linearity between finance and economic growth: a literature review and evidence from China

Gui

2021

Asian-Pac Economic Lit

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“…This plan is considered a public investment able to generate a strong degree of positive externality from both public and private sectors. Chen, Ratnovski, and Tsai (2017) demonstrate that Chinese local government expenditure has a positive effect on industry growth (especially in the manufacturing and construction sectors), and such an effect is striking given the 2010 global financial crisis. Ma and Sun (2005) also show that Chinese local governments' expenditure on both consumption and investment contributes to local economic growth, thus increasing firm productivity.…”

Section: The Correlations Between Land Price and Government Expendmentioning

confidence: 98%

Fiscal Expenditure and Industrial Land Price in China: Theory and Evidence

Tsai

Huang

Chiang

2020

Contemporary Economic Policy

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This paper aims to discover the mechanism behind the positive correlation between local fiscal expenditure and industrial land price in China, a stylized fact discovered by bivariate and regression analyses. The model shows that if the positive externality of government expenditure on growth is sufficiently high, the local government has an incentive to increase public spending in exchange for the reduced demand for industrial land by charging a higher markup and driving up the industrial land price. Therefore, we observe a positive correlation between the local fiscal expenditure and industrial land price. (JEL D42, H72, R51)

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“…The results indicate that average real GDP growth for 2012-16 would have been 5.3 percent rather than the actual average of 7.3 percent. The second approach (Chen and Ratnovksi, 2017) estimates growth using provincial panel data during 2003-15, assuming a lag in the effect of credit growth on output growth. It finds that 2012-16 average real GDP growth would have been 5.9 percent.…”

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confidence: 99%

People's Republic of China

2017

IMF Staff Country Reports

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This Selected Issues paper examines the drivers and prospects for high levels of savings in China. China has one of the highest levels of national savings in the world, which is at the heart of its external and internal imbalances. High and rising household savings have mainly resulted from demographic changes as a result of the one-child policy and the breakdown of the social safety net during the transition from a planned to a market economy. Demographic changes will put downward pressure on national savings. Policy efforts to strengthen the social safety net and reduce income inequality are also needed to reduce savings further and faster and to boost consumption.

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Credit and Fiscal Multipliers in China

Cited by 8 publications

References 21 publications

The non‐linearity between finance and economic growth: a literature review and evidence from China

The non‐linearity between finance and economic growth: a literature review and evidence from China

Fiscal Expenditure and Industrial Land Price in China: Theory and Evidence

People's Republic of China

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