The Different Impacts of Central and Local Public Expenditure on Consumption under the Perspective of Fiscal Decentralization

Abstract

China economic development has entered a new normal. Consumption plays a more and more important role in promoting economy. Based on the empirical statistics, we adopted the VEC model to analyze the dynamic linkages and influences between public expenditure and consumption. The conclusion is there are different impacts between central and local public expenditure, and in the long run, only the latter has a strongly positive effect on consumption. So trying to coordinate the relationship between central and local finance is of vital importance under the background of economic transition.