An Empirical Test on the Validity of China’s Fiscal Policy ——Based on the Ricardian Equivalence Proposition

Wen Fang, Jing Ma, Ye Sheng

Abstract


The Ricardian Equivalence Proposition is the essential proposition relevant to fiscal policy, which arouses
general discussions on the research of macroeconomic policies. Its establishment is rather difficult in reality as it
requires comparatively strict hypothesis. All the empirical studies on the Ricardian Equivalence Proposition have
not come into agreement so far. The purpose of this paper is to analyze the dynamic effect of China’s fiscal
policy by utilizing impulse response function on the basis of establishing SVAR model which contains China’s
fiscal variables. Consequently we make an empirical conclusion that the Ricardian Equivalence Proposition is
untenable on China’s economy.

Full Text: PDF DOI: 10.5539/ijbm.v5n8p209

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International Journal of Business and Management   ISSN 1833-3850 (Print)   ISSN 1833-8119 (Online)

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