An Econometrical Study On The Relevance Between Economic Volatility Asymmetry And Macro-control Policy

Since China has stepped into the new normal period of macroeconomic, the disscussion about “middle-high speed” 、 “optimize structure” 、 “new power”and“more challenge”have gradually come into researchers’ perspective. A lot of researchers are debating over the structural shift of China’s economic growth. Although they didn’t form a unified cognition and judgment on the trend level after China’s economy fully adjustment, it is widely believed that the structural shift of China’s economic growth has been an irresistible trend in the near future. Actually, if the shift of economic growth is irresistible, preventing the economy from stalling, anticipating systemic deflation risks, and stabilizing economic fluctuations effectively will become the key of the macro regulation. In this paper, under this kind of macroeconomic background, we made a detailed discussion about the asymmetry characteristics of China’s economic fluctuations and the effectiveness of macro-control policy in stabilizing previous economic fluctuations.In this paper,firstly,we described all previous economic cycle fluctuations and summarized the typical characteristics of them since the reform and opening in China. To find that since the market economy system reform in 1992, radical changes have taken place in the structure of China’s economic cycle, which has obvious term structure extrude feature, with the fluctuation tending more microwave, especially in the economic cycle contraction phase, which has obvious systolic extension and new characteristics of lower volatility. And in terms of the effectiveness of the macro-control policies, the effect of fiscal policy and monetary policy in all previous reverse cycle control is remarkable, which means that the fiscal policy and monetary policy can stabilize the previous economic fluctuations in China effectively. However, in terms of the present stage, due to monetary policy has been faced with soft budget constraints, the government will use more pro-cyclical and fine-tuning macroeconomic regulation to stabilize the economy. Therefore, we still should not ignore the risk of economic stall, do strengthen the management of the public expectations as well as the beforehand prevention to stem economic downturn.Then, in order to further explore the effectiveness of monetary policy to stabilize economic fluctuations, this paper uses the threshold selection model to measure the asymmetric effects of monetary policy, which found that the impacts of interest rate adjustment and aggregate adjustment on the economic cycle are obvious different at the different stages, in low growth stage, the aggregate adjustment help stabilizing economic fluctuations and implement counter-cyclical expansion; in high growth stage, the interest rate adjustment can counteracting economic fluctuation significantly, but the monetary authority will use the aggregate adjustment cautiously. In addition, the nonlinear regression result in this chapter also shows that there are obvious threshold effects of inflation between economic fluctuation and monetary policy, in particular, when inflation is low, broad money issue can stabilize economic fluctuation effectively, and when inflation is high, the monetary authority tend to use price management method to stabilize economic fluctuations, to achieve a soft landing.And regarding the time-varying characteristics of monetary policy which is used to stabilize economic fluctuation, during the sample period, the impacts of broad money supply changing on economic fluctuation does exist significant asymmetric effects, which is the most significant during the subprime crisis, increasing the broad money supply can stimulate the expansion of real output effectively, the strength of it up to 3 times higher than now, and the financial crisis in southeast Asia, its effect is also considerable. But at this stage of the policy adjustment, it’s hard to impact economic fluctuation by increasing the broad money supply, which objectively explained why Chinese government and monetary authority use the broad money supply adjustment cautiously in recent years, on the other hand, it also suggested the mechanism of action among economic variables will take fundamental change as change in value.Then, this paper also analyses the effectiveness of fiscal policy systematically, which found that the impact of fiscal policy on economic fluctuations also have a typical asymmetrical characteristic, the counter-cyclical expansion effect of active fiscal policy is much stronger than the inhibition effect of tight fiscal policy; And when the economy is on the high volatility regime, fiscal policy is more effective. The two kinds of typical characteristics above are caused by expected non-symmetry、the asymmetry of crowding out 、the asymmetry of price adjustment、the asymmetry of government policy.Further, the author based on MS- VAR model to measure the dynamic regulation effect of fiscal policy in different regimes. The results suggested the level of economic growth can affect the level of financial expenditure significantly, which means Wagner’s Law is still valid in China. Moreover, as far as dynamic adjustment mechanism of fiscal policy, in the low volatility regime, the government should let the market mechanism bring its internal function into force instead of intervening by policy; in the high and middle-high volatility regime, fiscal policy can play a good role to stabilize economic fluctuations.Finally, this paper used mixed-frequency data module to compare the effectiveness of fiscal policy and monetary policy regulation, to measure effectiveness of fiscal policy and monetary policy on stabilizing economic fluctuations, which found that the effect of monetary policy is better. However, due to the serious problem of China’s “currency of super-made”,there are strong soft budget constraint on monetary policy, and as the result of the fiscal policy crowding out effect, active fiscal policy should not be used for long, but it is still an effective means of stabilizing economic fluctuations in the short term.