Fiscal policy uncertainty and heterogeneous government spending multipliers in China: evidence from smooth-transition local projections

This article examines the heterogeneous impact of fiscal policy uncertainty (FPU) on the size of fiscal expenditure multipliers using Chinese provincial data. By employing a novel method to identify FPU and utilizing smooth-transition local projections, we find that multipliers are significantly larger under low uncertainty, particularly in developed regions. These effects also vary considerably across spending categories. The findings emphasize that enhancing the predictability of fiscal policy rules, improving regional development, and adjusting expenditure structures can significantly increase the effectiveness of fiscal spending, indicating the potential for better outcomes in future macroeconomic regulation.