Macroeconomic Effects of China’s Fiscal Stimulus

Arbeitspapier

This paper analyzes the macroeconomic impact of China’s 2009-2010 fiscal stimulus package by simulating a dynamic general equilibrium multi-country model of the world economy, showing that the effects on China’s economic activity are sizeable: absent fiscal stimulus China’s GDP would be 2.6 and 0.6 percentage points lower in 2009 and 2010, respectively. The effects are stronger under a US dollar peg because of the imported loose monetary policy stance from the United States. Higher Chinese aggregate demand stimulates higher (gross and net) imports from other regions, in particular from Japan and the rest of the world, and, only to a lesser extent, from the United States and the euro area. However, the overall GDP impact of the Chinese stimulus on the rest of the world is limited. These results warn that a fiscal policydriven increase in China’s domestic aggregate demand associated with a more flexible exchange rate regime have only a limited potential to contribute to an orderly resolution of global trade and financial imbalances.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IDB Working Paper Series ; No. IDB-WP-211

Classification and Topics

• Classification: Wirtschaft ; Fiscal Policy ; Open Economy Macroeconomics ; International Policy Coordination and Transmission ; Fiscal Policies and Behavior of Economic Agents: General ; National Debt; Debt Management; Sovereign Debt
• Subject: Fiscal stimulus ; Financial crisis ; Antizyklische Finanzpolitik ; Finanzkrise ; Makroökonomischer Einfluss ; China

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cova, Pietro ; Pisani, Massimiliano ; Rebucci, Alessandro
• Event: Veröffentlichung
• (who): Inter-American Development Bank (IDB)
• (where): Washington, DC
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/89013
• Last update: 10.03.2025, 11:41 AM CET