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Shvoong Home>Social Sciences>A Study on Theoretical Multiplier of the Fiscal Policy in China and Its Actual Multiplier Effects Summary

A Study on Theoretical Multiplier of the Fiscal Policy in China and Its Actual Multiplier Effects

Article Summary   by:TsingHua     Original Author: The Study of Finance and Economics
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By establishing a macroeconomic model, the paper calculated the multiplier of the theoretical fiscal policy and that of the actual fiscal policy. The result shows that neither of the multiplier value of fiscal policy is big, the multiplier value of actual function, in particular, is obviously low, while the crowding-out effect of fiscal policy is also not obvious. As regarding the affecting factors of multiplier, the possible reason lies in that the marginal consumption tendency is too low and there exists great hardness in consumption. According to the above calculated value, we also calculated the comprehensive multiplier effect of fiscal policy in two models. Apparently, fiscal policy is a major lever for government to control economy, in which the expenditure of government purchase is the most major policy tool. Furthermore, although there exists a great gap between theoretical multiplier and actual multiplier, the gap between the effects of promoting economy by their respective final multiplier effects is not large. The actual multiplier effects of fiscal policy surpass theoretical multiplier effects in most years.
Published: January 03, 2004   
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