| China’s reform and opening-up has taken place from the beginning of1978. With thedevelopment of our country’s economy and the improvement of opening to the outside world,the contradictions of Chinese internal and external equilibrium become increasingly intenseand complex. In order to control Chinese internal and external economic disequilibrium, ourgovernment uses a variety of policy instruments, and strengthens the policy force. However,the policy effect is not just as one wish. In recent years internal structural disequilibrium andexternal double surplus have not been fundamentally improved. Internal and externaleconomic disequilibrium has brought out lots of obstacles and negative influence on thedevelopment of China. In the field of economy, it causes investment structural distortion, lowefficiency of resource allocation, not sustainable economic growth and may lead to economiccrisis; in the field of society, it causes the large social gap between rich and poor, unimprovedquality of people’s life，and may go against the national harmony and stability; in the field ofresource and environment, it causes environmental pollution, wasteful of scarce resources andso on. Therefore, Governance of Chinese internal and external economic disequilibrium isvery necessary and urgent. Under the background of Chinese internal and external problems,this paper studies the impact of macro policy on Chinese internal and external equilibrium inan optimized fiscal and monetary policy perspective.This paper is divided into six chapters, the first chapter is introduction. This chapterintroduces the background and the significance of the study, and reviews the relevantliterature, research contents and methods, innovative features and shortcomings. This chapteris the overview of the full text.The second chapter reviews the related theories. This chapter focuses on four aspects:Firstly，it explains the internal and external equilibrium theory. The meaning of the concept ofinternal and external equilibrium is developed based on the concept of equilibrium. Thecontradiction and the conflict between the internal and external equilibrium is more commonand frequent. Secondly, it explains the theory of fiscal policy，which discusses from four mainaspects. They are as follows: the conception of fiscal policy, the objection of fiscal policy, thepolicy tools and conduction mechanism. It then explains the theory of monetary policy. Thecontent is similar with the front part, it focus on the conception of monetary policy, the goal offiscal policy, the policy tools and conduction mechanism. Last, but certainly not least, itexplains the theory of fiscal and monetary policy mix. The two aspects are discussed one byone: the necessity of the policy mix, and the theory logic of the policy mix. This chapter is atheoretical statement of the full text, providing the theoretical basis for the following empirical research.The third chapter presents the establishment of Chinese financial computable generalequilibrium (CGE) model. Generally speaking there are no certain rules to follow in order toestablish CGE. It is always driven by research purpose. In view of this paper is to study theoptimal fiscal and monetary policy to realize Chinese internal and external equilibrium, itneeds to establish financial CGE model. This model describes six main action bodies; they arethe resident, the enterprise, government, central bank, commercial bank and the foreigndepartment. Accordingly it forms four types of equations: the production equations, priceequations, income/expenditure equations and financial assets portfolio equations. Thenaccording to the general equilibrium theory, it establishes the market clearing equations. Thismodel chooses Keynes macro closure and corresponding with the price benchmark in the lightof the research objective. This chapter is the focus and core of the full text.The fourth chapter introduces construction of the Chinese2011Financial SocialAccounting Matrix (SAM), which is the database of the established financial CGE model.This financial SAM is mainly divided into two parts; they are entity module and financialmodule. Entity module describes the activity, commodity, elements and main action bodies’current account. Financial module describes main action bodies’ capital account and financialasset tools. The connection between entity module and financial module is realized throughthe mutual transformation of savings and investment in fixed assets. The remainder of thischapter calibrates the parameters of the estimated Financial CGE model using this financialSAM, which is the basis the model depends on. This chapter is to provide data support for thefinancial CGE model established on Chapter3.The fifth chapter addresses the issue of policy optimization based on Chinese financialCGE model. This chapter simulates the changes of fiscal and monetary policy, and thenexplores the effect of these changes to the Chinese internal and external equilibrium. Thereare three kinds of tools of fiscal policy and three kinds of tools of monetary policy: indirecttax, purchase expenditure, transfer expenditure, the exchange rate, the deposit reserve ratioand the benchmark deposit and loan interest rates. After setting the simulation scenarios, theoperation of these simulations are performed by GAMS program, which shows the effect ofthe changes of six kinds of policy tools to internal and external equilibrium. This chapterrealizes simulation results based on the second chapter’s theory, used the financial CGEmodel established on the third chapter, and taken advantage of data compiled on the fourthchapter.The sixth chapter draws some conclusions and suggestions. According to the simulationresults of the fifth chapter, this chapter sums up some conclusions of the paper,and putsforward feasible suggestions based on the conclusion.
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