An Empirical Analysis of the Effects of Government Expenditure and Tax Revenue on GDP Growth Based on Data Frequency

Abstract

This paper offers a thorough empirical analysis of the effects of fiscal variables on economic growth based on data frequency. We distinguish the Stabilizing and discretionary effects of government expenditure and tax revenue in China on its GDP growth using the vector auto regression technique. The variables used in this study include government expenditure, tax revenue, and GDP values and the statistical values used for all these variables are month and annual time series data among them annual data covering the period of 1952 to 2018 and month data covering from 1998-1 to 2019-9. We believe that stabilizing effect can be found in month data analysis and discretionary effect can be found in annual data analysis. Overall, the empirical results indicate that stabilizing and discretionary effects of Chinese government expenditure and tax revenue do react systematically to output changes strongly. But the accumulated effects on GDP are positive for month data negative for annual data.