Coordination Of Fiscal And Monetary Policy And Inflation Rates In China's Economy

After the outbreak of the financial crisis in 2008, we made several adjustments of fiscalpolicy and monetary policy. As the economy has entered a "post-crisis period", there are somenew issues in China's economic development. According to different situations andmacroeconomic fluctuations in business cycle, we take the coordination of fiscal policy andmonetary policy to analyse the causes and mechanisms of China's inflation, in order to providesome valuable advices to keep the economy for the long-term stable development.Qn the basis of analysing and evaluating of Monetary Quantity Theory and Fiscal Theory onPrice Level, we will have a normative analysis on the basic principle of the fiscal policy andmonetary policy coordination, as well as the causes and theoretical models of inflation/deflation.The break-out of U.S. subprime crisis gave people a new awareness of the importance ofpolicy rules. Here we focus on Taylor Rule and Inflation Targeting Rule from monetary policyrules, and also fiscal policy and expenditure deficit rules from the fiscal rules. The historicaldevelopment told us that "single rule" approach could have very serious consequences. Therefore,only the combination of two policy rules could achieve better economic stability and growth.Transparency of macroeconomic policies is a effective tool to ensure the betterimplementation of policy rules. We analyse the relationships between the transparency ofmonetary policy and financial policy and inflation. The results show that increased transparencyto some extent, can effectively reduce the level of inflation.After the theoretical analysis, through a empirical analysis of the dynamic relationshipbetween China's fiscal deficit, money supply and the price level, the results showed that in China,inflation is not only a monetary phenomenon, but also the financial phenomenon.