Studies On The Fiscal Policy's Mechanism In The Short-run And Long-run During The Economic Performance Of Our Country

Since the reform and open-up in 1989, the fiscal policy, as one of the most important instruments of controlling the macroeconomic in our country, has undergone the constrictive fiscal policy, expending fiscal policy and moderate fiscal policy and the term structure has changed largely, which has placed the emphases on the goals in the long-run but not the changes in the short-run. With the growing of the depth and breadth of China's reform and opening up, the fiscal policy's transmission mechanism and effect depends not only on the domestic economic development, but also on the trend of development of the world economy. So the effects and mechanism of fiscal policy during the economic performance in our country has become the import area which economists take the efforts to study.The paper tries to consider the operation, effects and term structure of China's financial policy during the economic performance in our country, and give the comprehensive and clear evaluation and judgment on the practice and experience in fiscal policy, and give a great help to the authorities to propose an useful and appropriate policy.The paper has the following chapters:Chapterâ… gave brief introduction and comments of classical and modern theory of fiscal policy at first, and then gave a good compare and summary of transmission mechanism and effect mechanism of fiscal policy. Then, we gave description and evaluation of the effect of fiscal policy. And then, we proposed the study ideas and frame structure of the paper. Finally, we give the innovations in the paper.Chapter II is the theory part of the paper and is the basic part of the whole. In this chapter, we detailed the classical theory of fiscal policy model-IS-LM curve mechanism, and then discussed the issues of the effect of fiscal policy. We also introduced the maturity structure of fiscal policy and gave the mathematical derivation of the proposition of Ricardian equivalence theory. Finally we tested the short-term effectiveness and long-term neutrality of the fiscal policy.Chapter III mainly introduced the basic principles and empirical evidence of the fiscal rules. At the beginning of the chapter, we describe and test the rules and selectiveness of the fiscal policy. Then, we give the detailed introduction of the rules and make a compare of them. As the fiscal budget restriction has played a very important role in analyzing the effect and implement of the fiscal policy, we take the cointegration test of the government expense, government debt and the total income from the tax and the seigniorage. We find that the three variables do have a cointegration relationship in the long-run, and the fiscal budget restriction in the long-run has come into existence in our country.In the Chapter IV, we tested the relationship of the fiscal budget deficit and the rate of inflation in our country by using several methods of econometrics. At first, we describe the dynamic characteristics of the government budget deficit and the rate of inflation, and then established the theoretical model of the two variables. Then we tested the Granger Causality relationship of them and on the basis of the past empirical test, we use impulse-response function and MS-VAR model to test the relationship of them. We find that the relationship of the government budget deficit and the rate of inflation in our country is not remarkable and the expending fiscal policy can raise the prices in the short-run, but the breadth is quite small.In the Chapter V, we analyzed and testes the"Crowding out"effect of the fiscal policy. And we tried to judge the effect of the budget deficit on the investment on the fixed assets and the investment on the private departments, which help us to find the"Crowding out"effect of the scales of the deficit on the two departments. We find that, the"Crowding out"effect of the scales of the deficit on the two departments not only depended on the the relationship of cointegration of them in the long-run and the error correction model in short-run but also on the length of complement of the fiscal policy and the stages of the economic cycles. At the same time, the causation of the deficit has influence on the behaviors of the investment of the private department. It means that the views which the New Classical Economics and Money Economics and the New Keynes Economics have rely on the term structure of the fiscal policy and the circumstances.In the Chapter VI we tested the interrelationship between the fiscal policy and economic growth and the economic cycle fluctuations. At first, we measured the stages of the economic cycle fluctuations in our country, and then we tested the anti-cycle effect of expending fiscal policy on the real economic growth. Next, we isolated camera selective ingredients from the fiscal policy in the course of operation, and tested the fiscal policy's effect on the stability of the economy. We find that there are notable cyclical characters in the size and the operation of the fiscal policy. At the same time, the fiscal policy in our country has notable"stability effect"and there is negative relationship between the size of the deficit and the fluctuations of GDP. Further more, we find that there is remarkable selectiveness factor in the fiscal policy in our country, which will have the influence on the fluctuations of the economy and the vice versa. It means that the designers of the policy place their notices not only on the mechanism and effects of the policy but also on the circumstances, which is the main reason of why the fiscal policy rely on the fluctuations of the economy. Further more, we should notice that the relationship of the fiscal policy and the economic fluctuations is notable in the short run but in the long run the neutrality is worked out.Chapter VII firstly gave illusion decomposition and test on the fiscal policy and gave the derivation of financial expenditure model with"expected misconception". Then we choose a different index to measure the"fiscal illusion"of fiscal policy, which help us to test the components of China's fiscal expenditure. Finally, we analyzed the implications of "fiscal illusion" of fiscal policy in our country. We find that the"fiscal illusion"have somewhat effect on the government expend of our country. And no matter it is the"expectable illusion"or"deficit illusion", it raise the government expend and the demand of the public expend on some extent. Obviously,"fiscal illusion"makes the government expend exceeding the normal level, and cause the distortion of the collocation of the resources and then decrease the efficiency of them. As a result, we should increase the proportion of the spending on the output, such as, the investment on the basic construction and project, and decrease the proportion of the other investment, then increase the multiplicator effect of the government spending on the output, which will decrease the degree of the"fiscal illusion"and make good use of the fiscal policy's effect on the supply management and help to realize the expectable goals.So,the paper aims at studying the fiscal policy and finding out the empirical facts and typical facts in the economic experiences in our country. And by giving the detailed introduction and the induction to the research in the areas, we will distinguish the true facts in the fiscal theories and find the meanings and revelation of the fiscal policy in our country, which help our government to constitute the effective macroeconomic policies.