An Empirical Study Of The Impact Of Yunnan's Fiscal Expenditure On Private Investment

Financialpolicy has a substantial impact on leading economy, especially in promoting the economy to healthy development. With the continuous improvement of China's economic level, regional governments'financial revenue increase significantly. At the same time, each province' local governments'financial expenditure shows a progressive growth as well, take Yunnan province as an example, which share of GDP increased from 20.59% in 2000 to 34.63% in 2014 and accumulatively rised to 14.04%.This paper focus on Yunnan province, using time data to build a VECM model to measure the relationship between Yunnan local fiscal expenditure and private investment. After observing the chart of VAR Impulse Response, we found that the local fiscal expenditure has positive effect on private investment in the long run, which is consisted with state fiscal expenditure.Yunnan local GDP has positive relationship with the private investment. And the result of cointegration equation shows that local consumption expenditure has substantial impact on private investment but local taxes crowd-out private investment over a long period of time. In addition, we adopt panel date, making research on whether the local fiscal expenditure of 16 regions of Yunnan province has the same effects on private investment. And this paper add two variables(total value of imports and exports and utilization of foreign capital) of Yunnan 16 regions, in order to research the deep relationship of local government expenditure and private investment in condition of open-economy. Finally, we find that the extent of open in areas has no influence on private investment. After analyzing the panel data of Yunnan 16 regions, overall, the local economy growth and local fiscal expenditure has positive effects on private investment. (except for the local fiscal expenditure in pooled regression). In open-economy, after adding variable, total value of imports and exports, this variable has hardly confirm impact on private investment. However, the extent of utilization of foreign capital has no obvious effects on private investment. Therefore, according to the analyze of former models, we could make a conclusion that the private investment of Yunnan 16 regions have largely depend on the performance of local GDP and the scale of local fiscal expenditure. Moreover, if the scale of former two variables are bigger, the influences are more obvious on stimulating private investment. But there is no evidence to illustrate that the extent of local regions have influence on private investment.