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The paper aims to analyze quantitatively the households' final consumption expenditure model in China within the framework of the "dual circulation" policy and stimulation of domestic demand, which underlies the country's 14th Five-Year Plan for 2021–2025. Model identification bases on assessing the impact of six determinants (current income, permanent income, wages, earnings of employees, domestic credit to private sector, and price level) on the households' final consumption expenditure growth and its contribution to the country's economic growth. The Granger causality test underlies the methodological approach of the research. The analysis found that the consumption pattern of Chinese households can be defined as driven equally by current income, debt and price levels. To achieve the maximum consumption effect over 3–4 years, the following conditions must be ensured in the country: expanding access to credit should be followed by a general increase in per capita income, accompanied by lowering prices. Income policy has the dual effect of stimulating the country's overall economic growth through both the demand channel and the investment and/or export components of growth. At the same time, the income elasticity of households' final consumption expenditure remains low: the population's continued high propensity to save is constraining the growth of current consumption and China's transition to a consumption-led economic growth model as well. An alarming trend is the significant mutual influence of debt accumulation and the growth of households' final consumption expenditure. Policies aimed at stimulating private consumption may contribute to worsening China's debt problems in the medium and long term.

AbstractOne of the most debated issues in modern macroeconomics relates to the behaviour of private consumption in response to an increase in government spending. Recent empirical studies have found a positive relationship between these two macroeconomic fundamentals. However, such a finding cannot be easily reconciled with simple real business cycle models. In this paper, we develop and estimate a new Keynesian model that is able to predict a rise in consumption in response to an increase in productive public spending. We show the two key elements that lead to a statistically significant positive reaction of private consumption, thereby creating consumption present‐value multipliers, are: (i) a productive component in public spending and (ii) nominal rigidities. Our key results remain valid to various robustness checks that include a sub‐sample analysis examining the pre‐Great Recession period and a sensitivity analysis on the structural, fiscal and monetary policy parameters of the model.

In last few decades, the study of the relationship between the real government consumption and rea.· private consumption has attracted the attention of many economists and policy makers. Keynesians, or the one hand, holds that government spending has a positive or expansionary effect on privat£ spending; neo-c/assicals, on the other hand, argue that government spending crowds out privat£ spending. The supporters of Ricardian Equivalence Hypothesis advocate for no effect of govern mer.= spending on private spending. In the existence of this paradoxical evidence, this paper attempts t: investigate the dynamics of the interaction among government and private consumption in India fo • the period 1960-61 to 2008-09. Using the Cointegration test and error correction model, the study add: the literature the evidence in support of the long-run equilibrium relationship among variables. Tr:: causality test in the error correction model indicates that there exists a unidirectional cause relationship which runs from private consumption expenditure to government consumptio· expenditure in the long-run. However, the Granger causality test indicates that there is no short-n. - causality between them.

This study considers the effects of fiscal policy on private consumption in a framework that encompasses both the conventional (Keynesian) view of fiscal policy and the Ricardian debt neutrality hypothesis.The model is built on Blanchard's stochastic model of intertemporal optimization with finitely lived consumers.As an extension to the basic framework, public consumption is explicitly incorporated in the model.The model also nests the excess sensitivity hypothesis enabling an investigation of the role of current income in consumption.The empirical analysis is based on annual data from ten EU countries covering the years 1961-1994 and uses the nonlinear instrumental variable GMM estimator both in countryspecific and panel estimations.The tests clearly reject Ricardian debt neutrality for the majority of countries in the sample.The deviations from Ricardian neutrality seem to arise from excess sensitivity of consumption to current income rather than from a finite planning horizon on the part of consumers.The results also suggest that in consumers' utility functions, government consumption and private consumption tend to be unrelated or complements rather than substitutes.