Role of fiscal and monetary policies for economic recovery in China

Abstract

After the pandemic, China’s fiscal and monetary authorities implemented macroeconomic restructuring measures to combat the pandemic. Using a difference-in-difference model based on data collected during the COVID-19 phase, this study attempted to determine the economic recovery in China using the pandemic means for economic growth and energy consumption in other economies. A 0.21 percent increase in the western region’s economic growth is comparable to a 0.15 percent increase in the growth of the southern central and northern regions during the pandemic period. Accordingly, we found evidence of actual provincial spillover effects in the clustering of high- and poor-performing regions. The impact of China’s economic resurgence beyond the pandemic phase plays an important role in expanding power consumption in different regions. Since headwinds hamper economic development to aggregate output, fiscal policy is the sole option for maintaining pollution levels while simultaneously improving household well-being in terms of demand and employment.