Publication: Demystifying China’s Fiscal Stimulus
Loading...
Date
2012-10
ISSN
Published
2012-10
Author(s)
Abstract
China's government economic
stimulus package in 2008-09 appears to have worked well. It
seems to have been about the right size, included a number
of appropriate components, and was well timed. Its
subnational component was designed to maximize the impact of
the stimulus package on the economy and minimize the
potential procyclical elements that are usually built into
subnational fiscal mechanisms in federal countries.
Moreover, China's massive fiscal stimulus played an
important role in the overall recovery of the global
economy. Using a simple analytical framework, this paper
focuses on two key factors behind the success of the
stimulus: investments in bottleneck-easing infrastructure
projects and countercyclical nature of subnational spending
based on the assumption that well-chosen infrastructure
projects could improve business climate and thereby crowd in
the private investment. The paper concludes that the
expansionary subnational government spending played a key
role in strengthening the overall impact of the stimulus and
sustaining growth. It also highlights the importance of
public investment quality and cautions about the
sustainability of local government financing through the
domestic banking system and increases in local governments
off balance sheet or contingent liabilities. These lessons
may be of particular relevance today for China, as well as
other countries, in formulating policy response to another
global economic slowdown or crisis, possibly as a result of
the Eurozone turmoil. For China, investing in urban
infrastructure and green economy, as well as in higher
quality and better targeted social services, will be crucial
for improving income inequality and inducing a more
inclusive growth path.
Link to Data Set
Citation
“Fardoust, Shahrokh; Lin, Justin Yifu; Luo, Xubei. 2012. Demystifying China’s Fiscal Stimulus. © World Bank, Washington, DC. http://hdl.handle.net/10986/12066 License: CC BY 3.0 IGO.”
Other publications in this report series
Publication Right to Education(Washington, DC: World Bank, 2024-03-12)About a third of the 7.7 million Venezuelans who have left their country due to political and economic turmoil have settled in neighboring Colombia. The extent to which the Colombian schooling system can absorb the massive demand for education of Venezuelan children is key for their future trajectory of human capital accumulation, as well as that of Colombian students in receiving communities. This paper estimates the effect of Venezuelan migration on educational outcomes of children living in settlement municipalities in Colombia, distinguish between the effect of the migration shock on native and migrant students. Specifically, it estimates the effect of the migration shock on school enrollment, dropout/promotion rates and standardized test scores. The identification relies on a plausibly exogenous measure of the predicted migration shock faced by each Colombian municipality every year. The findings show that the migration shock increased the enrollment of Venezuelan students in both public and private schools and in all school grades, but also generated negative spillovers related to failing promotion rates and increasing dropout. This paper documents that these negative effects are explained by the differential enrollment capacity of schools, as well as by the deterioration of key school inputs.Publication Environmental Policy under Weak Institutions(Washington, DC: World Bank, 2024-03-11)Developing countries are facing mounting pressures to incorporate environmental concerns into their policy reform agendas. This paper finds that common environmental policies, such as levying taxes to reduce the excessive exploitation of natural assets, can be self-defeating when (i) institutions are weak and (ii) the general equilibrium effects of such policy actions are overlooked. This seemingly paradoxical result is driven by fundamental mechanisms in structural transformation frameworks, without the need for strong assumptions. It also carries a clear policy implication: environmental policies should be considered within a country’s broader development context, rather than in isolation.Publication The Quality and Price of Africa’s Imports of Digital Goods(Washington, DC: World Bank, 2024-03-08)Imported digital goods are critical for productivity growth in low-income countries. Using detailed data on international trade flows and tariffs, this paper finds that African nations tend to import relatively low quality, low price digital goods. It also finds that digital goods in Africa are subject to relatively higher tariffs, along with other factors that contribute to their higher cost in the domestic market compared to other regions, especially in some low-income countries. The findings show that the African Continental Free Trade Area will do little to reduce this tariff burden, as most digital goods are sourced from higher income nonmembers. In contrast, unilateral tariff liberalization toward all countries would significantly increase the imports of digital goods in Africa.Publication Reviewing Assessment Tools for Measuring Country Statistical Capacity(Washington, DC: World Bank, 2024-03-06)Country statistical capacity is increasingly recognized as crucial for development, but no academic study exists that reviews the available assessment tools. This paper offers the first review study that fills this gap, paying particular attention to data and practical measurement challenges. It compares the World Bank’s recently developed Statistical Performance Indicators and Index with other widely used indexes, such as the Open Data Inventory index, the Global Data Barometer index, and other regional and self-assessment tools. The findings show that each index brings advantages in data sources, number of indicators, measurement focus, coverage of countries and time periods, and correlation with common development indexes. The Open Data Inventory index covers the most countries, the Global Data Barometer index collects data through its surveys, and the Statistical Performance Indicators and Index offer a broader framework for assessing statistical systems. The paper offers further thoughts on the potential mechanisms through which these tools can bring positive impacts on economic activities and some political economy concerns, as well as future directions for development.Publication High Temperature and Learning Outcomes(Washington, DC: World Bank, 2024-03-05)This paper uses data from 2003–19 on 2.47 million test takers of a national high stakes university entrance exam in Ethiopia to study the impacts of temperature on learning outcomes. It finds that high temperatures during the school year leading up to the exam reduce test scores, controlling for temperatures when the exam is taken. The results suggest that the scores of female students are less impacted by higher temperatures compared to their male counterparts. Additionally, the analysis finds that the scores of students from schools located in hotter regions are less impacted by higher temperatures compared to their counterparts from cooler regions. The evidence suggests that the adverse effects of temperature are driven by impacts from within-classroom temperatures, rather than from indirect impacts on agriculture.