Confidence, Signaling and Economic Stimulus Policy
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| Title | Confidence, Signaling and Economic Stimulus Policy
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| Author | He Ping and Liu Zehao |
| Organization | Tsinghua University |
| Email | heping@sem.tsinghua.edu.cn；liuzh.13@sem.tsinghua.edu.cn |
| Key Words | Signaling; Economic Stimulus Policy; Entrepreneur Confidence; Consumer Confidence |
| Abstract | The transmission channel of economic stimulus policy varies in different economic environments. This paper points out that the belief models based on real business cycle and smoothing consumption in the literature don’t apply to China. We develop a new framework with information asymmetry, claiming that investment inefficiency can serve as a signaling tool of the government to deliver information to the market. Empirical evidence based on various econometric models illustrates that the 2009 “Four Trillion” stimulus policy, though along with some inefficient investment, has contributed to economic growth through its significant positive impact on entrepreneur confidence. |
| Serial Number | WP909 |
| Time | 2015-08-07 |
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