A Study On The Relationship Between The Fiscal And Monetary Policies And Economic Growth In China

Fiscal policy, enacted by government, consists of a series of rules such as finance income, expenses scale, and making both ends meet, and correspondent measures. Its making and implementing courses are the realizing course of macro-economic control. Aims of this policy are increasing employment, stabilizing commodity price and promoting economic growth.Monetary policy is a summary of all the policies and strategies under which the Central Bank adopts various tools to regulate money supply to meet the macro-economic targets. It is a vital part of macro economic policy.In modern economic theories and practice, fiscal policy and monetary policy are the most important tools. To select proper policies, to flexibly use them, and to make them cooperate in harmony are prerequisites for modern market economy to run smoothly and efficiently.In order to scientifically analyze the theory developing track of fiscal & monetary policies, to properly comment the effectiveness of these policies, and to offer right guide for theory application, this paper utilizes normative and empirical methods. Firstly, a summary on China's fiscal and monetary policies during the past years and their effectiveness is given. Then, based on sample data, an empirical research on the effect of these policies on economy development is made by the methods of co-integration and Granger test. Finally, risks in macro-economic control are analyzed, and the difficulties therein are pointed out and correspondent effective solutions are given.The research indicates :(l)China's fiscal and monetary policies are effective; (2)a time lag objectively exists and for various tools the lag differs; (3)different policy tools have different ways to work on economic growth, and there are some less effective and even invalid tools.Conclusions can be drawn as followed: (1) both inflation and deflation occurred in China, but China's economy as a whole keeps stable and run rapidly, which is highly relevant to the proper application of fiscal and monetary policies; (2) in order to facilitate sustainable economic growth, the reasonable fiscal and monetary polices and their specific intensity must be selected according to status of economy; (3) there are risks in macro-economic control, however the risks are controllable.