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Fiscal Expenditure And Resident Consumption-Base On Dynamic Stochastic General Equilibrium

Posted on:2015-12-18Degree:MasterType:Thesis
Country:ChinaCandidate:L ZhaoFull Text:PDF
GTID:2309330461958192Subject:Quantitative Economics
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China is one of the countries with the highest savings rate and investment rate. China’s low consumption rate has drawn attentions worldwide. Using preventive expenditure approach to calculate GDP, the final consumption accounted 62.1% in GDP in 1978 to 49.1% in 2012. The final consumption rate has dropped down substantially and is getting lower and lower, which has to provoke our thinking. While China’s continuously low consumption rate is beyond comprehension, Chinese government is always playing an important role in economic development. The government’s fiscal means has granted its powerful ability to meddle, which makes China a government-led economic development model. The question haunting the government and scholars is whether government’s high consumption crowds out personal ones. This study is all under the framework of DSGE(Dynamic Stochastic General Equilibrium). By dividing financial expenditure into productive expenditure and public welfare expenditure, I introduce the productive expenditure into firm’s production function to endogenize it and introduce the welfare expenditure into resident utility function to study the impact of the exogenous shock of these two expenditures on Chinese resident consumption. Then I construct a SVAR empirical model to investigate the relationship between resident consumption and financial expenditure structure.According to my theoretical and empirical research, in current China, the productive expenditure and welfare expenditure have more crowd-in effect than crowd-out effect. Both productive expenditure and welfare expenditure can promote resident consumption. Every 1% shock of productive expenditure will lead to 0.02% of resident consumption increase. After about 10 periods, the resident consumption will go back to what before the shock. So I conclude that at this point of development, proper productive and welfare expenditure increase will promote resident consumption to some degree.
Keywords/Search Tags:productive expenditure, welfare expenditure, resident consumption
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