【Abstract】 Based on the latest empirical literature,it estimates Chinese local government's cyclical policy response function using an annual balanced panel for 27 provinces over the period of 1994—2004 and System GMM method.We find,whenever based on total expenditure or decomposed expenditure,Chinese local governments conduct a more active expansion-biased fiscal policy during the recession than during the boom.It thinks that this policy response is an interactive outcome of Chinese-style fiscal decentralization and soft budget constraint.Then,it verifies our hypothesis using two government competition indicators.Finally,we give relevant policy suggestions.
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