The Analysis of Fiscal Expenditure’s Effectiveness After the Financial Crisis in China—On the Basis of Effectiveness of Output and Inflation

Abstract

Recent contexts focusing on the analysis of Chinese government’s fiscal expenditure between the year of 2009 to 2014 in the wake of the “four trillion “ economy stimulative plan in response to the financial crisis are not very abundant, whereas the problem of the effectiveness of finance expenditure is of great importance to the implementation of fiscal stimulus plans and rationalization the structure thereafter. The paper gets the general ketch of the fiscal expenditure in the past six years through the method of contrast analysis firstly. Then the author forms a theoretical model based on classical Keynesian economics theory and the general result is that the inflationary effect is more obvious than the output effect. Empirical analysis result has shown that after 2009 fiscal expenditure yielding effect just last for two years but the inflationary effect is long-lasting in China and there’s substantial cause-and-effect relationship between fiscal expenditure and inflation. At the conclusive part of this paper, the author comes up with brief recommendations on the recent fiscal expenditure structure of Chinese central government.
key words: Financial crisis; Strong inflationary effect; Weak yielding effect; Real gross domestic product