Due to the need of debt constraint and the fiscal policies issued, it’s possible that China will focus on the adoption of the MTEF (Medium-Term Expenditure Framework) and the MTEF will be one key reform field. Based on the data of 178 counties or regions from 1991 to 2008 published by the World Bank, this paper verifies the effectiveness of the MTEF adoption to the debt scale constraint and finds that the MTEF adoption can help reduce the government debt scale and the two basic levels of MTEF can play this role. What’s more, we conduct another
empirical research to find out which factors can influence the MTEF upgrade (upgrade means developing from nonperformance of the MTEF to performance or from the initial stage of the MTEF to the advanced one), finding that the debt scale, the executing time of the MTEF, the regional influence, the support from some international organizations and the development degree have obvious effect on upgrade. Meanwhile, there are opposite effect direction in different debt scale. If the debt scale is above the International Warning Line of 60%, larger scale of debt will lead to MTEF level maintenance (no upgrade). Otherwise, if below the International Warning Line of 60%, larger scale of debt will help the MTEF to upgrade.
Keywords: upgrade of the MTEF, constraint of the debt scale, debt risk
China Finance and Economic Review
Volume 7 Number 2 Summer 2018.P3