On the Fiscal Policy Effect During the Recession:Government Investment and Private Investment

During the recession,how to formulate appropriate fiscal policy so as to strike a balance between short-term policy effects and long-term growth is always a concern for policymakers.This paper innovatively introduces government and private investments into the RBC model(Hansen,1985)to study the effects of fiscal policy under China's circumstances.As reflected in the results,the effects of fiscal policy depend on the interaction between government investment and private investment.If government investment is able to promote rather than squeeze out private investment,fiscal stimulus could achieve better results.Therefore,in order to promote balanced and sustained economic growth,it is of great significance to further explore the catalyst role of government investment to boost private investment and tap the vast amount of private capital.