The Research on China's Fiscal Policy Multiplier under Open Economy: Based on the Perspective of Financial Frictions

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Journal of Central University of Finance & Economics ›› 2022, Vol. 0 ›› Issue (9) : 76-87.

LI Xiao-sheng, XIAO Yun-dong

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Abstract

Under the framework of New Keynesian dynamic stochastic general equilibrium model,We consider a variety of fiscal policy tools,uses China's economic data for calibration and estimation,and analyzes the sensitivity of parameters.We Study the multiplier of China's fiscal policy,and the results show that:(1)In the case of financial frictions,government expenditure has a greater impact on the macroeconomy than in the case of no financial frictions,and the multiplier of government expenditure is larger in the case of financial frictions.(2)The multiplier of government expenditure is always less than 1 in an open economy.(3)The macroeconomic effect of tax is smaller than that of government expenditure,but the long-term effect of tax is larger than the short-term effect.(4)The welfare analysis shows that the optimal combination of monetary policy parameters will produce small welfare losses.(5)The sensitivity analysis of parameters shows that the multiplier of government expenditure increases with the increase of financial frictions parameter and the autoregressive coefficient of government expenditure,while the multiplier decreases with the increase of openness degree.The study of this paper can provide some empirical supports for the current proactive fiscal policy.

Key words

Open economy / Financial friction / Fiscal multiplier / Dynamic stochastic general equilibrium

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LI Xiao-sheng, XIAO Yun-dong. The Research on China's Fiscal Policy Multiplier under Open Economy: Based on the Perspective of Financial Frictions[J]. Journal of Central University of Finance & Economics, 2022, 0(9): 76-87

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