Abstract: The crowding-out effect refers to the reduction of private investment and consumption caused by proactive fiscal policy; similarly, proactive fiscal policy’s boost of private investment and consumption could be called crowding in effect.By adopting spatial econometric model, This paper tests empirically the impact of the deficit fiscal policy to private investment and consumption from 1998 to 2011via a comprehensive perspective. The results show that the proactive fiscal policy generates significant crowding-in effect to private investment and consumption in most years. However, the current fiscal institution has a tendency to weaken the crowding-in effect.This paper argues that the evaluation of the effects of fiscal policy should be placed in the institutional environment in order to draw right conclusions.The crowding-in effect indicates that China's economic reform faces to a market-oriented development, but still need to be improvedcontinuously.
Keywords: Proactive Fiscal Policy,Fiscal Institution,Crowding-in Effect
source:Finance & Trade Economics ,No7,2013