Research On Non-linear Effects Of Fiscal Policy In China

Fiscal policy has different effect as economic environment change, mostly there is excess supply in commodity market and labor market, fiscal policies only have Keynesian effect,However, new evidences show, consumption, investment growth exceed reduce in financial expenditure when government carry out contractionary fiscal policy some time, in which conditions fiscal policy has non-Keynesian effect. Based on MS-VAR model, Chinese fiscal policy is proved to have non-linear effects. In most of the time from 1992 to 2015, fiscal policy has Keynesian effect. But some quarters in 1992-1994,2001-2005,2012-2015, fiscal policy has non-Keynesian effect. Generally, the frequency of non-Keynesian effect of fiscal policy is low, and the duration is short, the stability is weak.Chinese expansionary fiscal policy after 1997 and 2008 economic crisis have a Keynesian effect in early stage due to massive unemployment and spare capacity. While fiscal policy has non-Keynesian Effect when market demand expansion, consumer prices rise, shortage shows in commodity market and labor market. In which time, fiscal policy switching from expansionary to contractionary, financial revenue and expenditure balancing, economic growth rising, private consumption, investment increasing, proportion of state-owned enterprises fixed assets investment falling, but output gap is positive, which means aggregate supply exceeds aggregate demand, so the structure of the economic development needs more adjusted.