On The Institutional Transition Of China's Fiscal Policy And Economic Development

Fiscal policy plays an important role on economic development. It is important to the stability and healthy development of national economy, whether in developed market economies or in developing countries. As a developing country, the function of fiscal policy is much more evident in China. It significantly contributes to the economic growth and economic development of China, which is proved by the experiences of its economic development. The fiscal policy is more important to the development of an economy, particularly on the transitional stage before the establishment of a perfect market economic system.Attacked by the Asian financial crisis, Chinese economy confronted serious situation with insufficient domestic demands in 1998. Under such a severe macroeconomic environment, the central government of China has been exerting expansionary fiscal policies from then on, which have positively influenced its economy by stimulating domestic demands and accelerating economic development. Following work will be of great significance either for theoretical research or for economic practice. One is to summarize the relationship between fiscal policy and economic development in China. The second is to modify the mechanism of government revenue and expenditure step by step. The third is to learn advanced experiences from abroad. The last one is to explore how to make the best use of fiscal policy coordinating monetary policy to promote economic development in a stable and healthy way.Under the framework of western economic theories I will discuss the relationship between fiscal policy and economic development to show how important the fiscal policy is in accelerating economic development during the transitional period. Then, an empirical analysis will be done on the contribution of fiscal policy to economic growth and economic development on a more concrete ground. By comparison, I present the relationship between fiscal policy and economic development in case of some representative economies. I emphasize my work both on the relationship between tax policy and economic development, andthe relationship between government expenditure policy and economic development. It results in that a sufficient government revenue formation mechanism and a sufficient government expenditure mechanism are the key elements of the effectiveness of fiscal policy and the promotion of economic development. Due to the obvious roles that provincial and local governments play in economic development, I also present their coordination with central government. Reasonable coordination between governments at different levels is the basis of effective fiscal policy at institutional level. For the limitation of fiscal policy I also study the coordination of fiscal policy and monetary policy, coming into a conclusion that economic growth and economic development can be greatly encouraged by the effective coordination of these two macroeconomic policy instruments. This paper is divided into 8 chapters:Chapter 1 is an introduction. In this section, I will give the definition of economic development, briefly argue the role government plays in the development of economy, present the framework of the paper and the research methodologies, making some technical preparation for further debate on the relationship between fiscal policy and economic development.Chapter 2 is the analysis on the relationship from an economics' perspective. I will focus on two aspects, one is to summarize and analyze the relationship between fiscal policy and economic development under the framework of western economic theories. The other is to argue the role fiscal policy acts as in pushing forward the development of an economy, providing theoretical support on the implementation of fiscal policy in promoting national economic development in China. Particularly, comparing to developed market economies fiscal policy is even more important for economic development in China as a transitional economy. This requires the full use of fiscal policy and regards it as an imp...