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Studies On China’s Fiscal Policy

Posted on:2014-01-01Degree:DoctorType:Dissertation
Country:ChinaCandidate:S Y SiFull Text:PDF
GTID:1109330425973283Subject:Western economics
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Since the beginning of "Keynesian revolution" in the1930s, fiscal policy had been regarded as the key policy instrument in macroeconomic management, not only did it became a key research field in economics, but also it became an important policy tool for worldwide governments’macroeconomic management practice. As China began to carry out the "Reform and opening up" policy in1978, fiscal policy was adopted as an important part in the macroeconomic management toolkit under the socialism market mechanism, the role played by the fiscal policy had been becoming more and more important in regulating and accelerating economy’s healthy and sustainable development. From the breaking out of "Asian Financial Crisis" in1997to date, as a typical case, the economic conditions the government faced was changing fast, and Chinese government had made specific and powerful contingent fiscal policy decisions, that is, the government had successively implemented active fiscal policy, prudent fiscal policy and active fiscal policy in different periods, then China’s economic growth and industrial structure transformationere both boosted, the widening gap between regions had alleviated, and human livelihood had improved, these policies had a profound influence on economic operation and enriched the practice of macroeconomic management in theoretical aspect. Based on the theory of fiscal policy and China’s fiscal policies practices, especially the practices after the crisis, this paper focus on the following issues: On the base of measuring the trend of fiscal expenditure in China, which is a fiscal policy instrument, we study the comovement behavior between fiscal expenditure and business cycle, the mechanism of how fiscal expenditures series deviate its trend and forming cycles under external shocks in different periods(such as financial crisis),and study the feature of the cycle shape. Then, we study the macroeconomic level effects of fiscal policy in an further way, the effects it played in enhancing the whole economy’ sustainable, healthy and stable development effectively, and the effects it played in transforming economic structure, enhancing domestic demand and lowering the inflation et al. In microeconomic level, we study the effects of fiscal policy on balancing the widening gap in different regions, especially on the rural citizens’ income and consumption propensity. This paper studies the issues above-mentioned in depth, reveals the effects of China’s fiscal policy, and supplies solid support for fiscal policy formulation and timely adjustment in theoretical and empirical way. Specifically, the main contents of this paper contain the following four aspects:Firstly, based on the data feature of fiscal expenditure, we use the UC trend-cycle decomposition technique to decompose the data into three components, which are deterministic trend, stochastic trend and cycle components. The decomposition results of quarterly data shows that there is a robust deterministic trend, and the effect of random shock on the growth of fiscal expenditure is negative. on the whole, has a negative impact on the growth in government expenditure. The cycle components of fiscal expenditure has an explicit counter-cycle feature in some periods, which shows that China’s fiscal policy has an non-substitutable effect on economic stability.Secondly, based on the studies aforementioned, we study the New Keynesian dynamic general equilibrium model quite in depth, we make some necessary corrections in theory, and make some appropriate expansions based China’s reality to amend theoretically the model based on Chinese economic reality. Based on theoretical studies and China’s data feature, we construct a structural VAR model to study the dynamic effects of China’s fiscal expenditure and taxation factors on private consumption, on-government investment, employment and inflation. The main results of structural VAR model estimation are:government spending ratio increases one percent, on average, will bring up about three percent increases in non-government investment next period, bring up about0.26percent increases in resident’s consumption, and brings up about5percent increases in employment in the industry and tertiary sectors. The conclusions mentioned above, reveals that the shock effects of fiscal expenditure on aggregate variables such as investment, consumption et al in a quantitative perspective, it is of great significance for the government to formulate fiscal policy both in a referential and practical way.Thirdly, we study the effects of fiscal expenditure on economic growth from the central and regional expenditure aspects. Using providence level panel data, we construct a dynamic panel data model with interactive effects between central and regional fiscal expenditures, the variables in the model including regional fiscal expenditures and-economic growth indicators, the model is used to measure the effects of regional fiscal expenditure on regional economic development, reveals the difference of responses of different regional economic growth to the growth of central fiscal expenditure, and the different effects of central and regional fiscal expenditure on regional economic growth before and after the reform of the tax system.Finally, based on China’s rural economic structural feature and rural residents’ microeconomic decision-making behavior, we study fiscal expenditure, policy environment change and their effects on rural residents’income and consumption willingness. We construct a dynamic panel data model including income growth and consumer’s willingness variables, using province and autonomous region rural panel data to estimate and test the results, and analysis the specific effects of rural policy change on rural residents’income growth, measures the dynamic change feature of consumption willingness. The main results can be summarize as follows:(1)between1995and1997,the policy environmental effect of income improved year after year, the policy environment effect on consumption willingness stayed on a relative high level.(2) In2005,the policy environment effect of income began to get away from the low level, and started a gradual improving process, while the policy environment effect of consumption willingness began to go up one year later, since2006,the effects stayed at a high level. The model and conclusions showed above, illustrates that China’s rural fiscal policy on the whole changed the rural regions’ policy environment, strengthened rural residents’ consumption willingness, and enhanced rural residents’ living standard.
Keywords/Search Tags:Fiscal policy, Trend decomposition, Effect of fiscal expenditure, Regional difference, Rural residents’ consumption
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