Government Spending and Private Consumption of Beijing

Based on an inter-temporal substitution model, this paper analyzes the effects of government spending shocks on private consumption in Beijing with the Cointeg ration and ECM model. The empirical study finds out some conclusions: First, the government spending may crowd in private consumption, which is more effective i n the short run than in the long run. Second, the disposable income is the most important factor that affects the gross private consumption. Finally, the rural residents' consumption is less sensitive to the government spending while more s ensitive to disposable income than urban residents'.