“Credit and Fiscal Multipliers in China”

“Credit and Fiscal Multipliers in China”

Sophia Chen, Lev Ratnovski and Pi-Han Tsai

IMF Working Paper WP/17/273

Chen et al. estimate credit and fiscal multipliers in China. They use the tenure of the provincial party secretary, interacted with the type of stimulus used in other provinces, to obtain separate instruments for provincial credit and government expenditure. The results suggest that reducing credit growth in China is unlikely to disrupt output growth, whereas fiscal policy may be effective in supporting macroeconomic adjustment.