Economic Effects Of Financial Market Taxation

Financial market(abbreviate FM) plays the role of funds "reservoir", links savers and investors. Under the action of the financial market mechanism, it plays the role of adjusting the macro economy through impacting savers and investors. Financial market taxation(abbreviate FMT), as an important policy tool of Government regulating FM, is beneficial to promote healthy and stable development of FM and rapid development of real economy. From the 1997 Asian financial crisis to the 2008 global economic crisis, FMT shouldered the task of regulating FM and economic operation in China. In practice, what economic effects FMT can produce? Based on this, this paper explores real economic effects of FMT from the angle of micro and macro, economic efficiency and social Justice, seeks to provide policy decisions reference for our government.The text is divided into nine chapters, including theoretical analysis, empirical test and revelation. The fist Chapter is introduction.the second Chapter theoretically analyses FMT system run and the mechanism of economic effects generated by FMT. From third Chapter to the eighth Chapter is Chapters of empirically study.The third Chapter empirically study the micro effects of FMT on the stock market and bond market. From the fourth chapter to the seventh chapter empirically study the macro effects of FMT on real economy from the perspective of economic efficiency. The eighth chapter empirically study income redistribution effect of FMT from the perspective of social equity.The ninth chapter is conclusions and revelation.Chapter I is the introduction. This chapter covers describing the background and meaning of topics, explaining the basic concepts, acounting for the object of study, reviewing domestic and foreign literature, introducing to the methods of study, summarizing research ideas, pointing out the innovation and weakness of this paper. ChapterⅡis the general analsis of FMT, analysizes the process of FMT system run, reveals the internal mechanism of economic effects of FMT, which provide the basis for empirical analysis. And this chapter describes the composition of FMT in China.ChapterⅢis the analysis of micro-economic effects of FMT. Through constructing theoretical models, empirically testing microeconomic effects of FMT, major focusing on the impact of FMT on the bond market. using of general equilibrium theory of market, constructs respectively models of pricing models and market trading volume including FMT, and reveals effects of bond prices and the market scale of FMT.Chapter IV is empirical analysis of macro-economic effects of FMT which based on macro-economic variables in China. At the. macro level, this chapter empirically studies effects of FMT on economic variables from the perspective of economic efficiency. Along the thread of change of FMT→change in financial asset prices→change in consumption and savings→change in investment, the author empirically studies the impact of FMT on consumption, savings and investment, reveals the law that FMT affects economic variables. First, testing the consumption effect of FMT. Second, testing savings effect of FMT. Third, testing the degree and direction of the change in investment which caused by FMT.Chapter V is empirical analysis of macro-economic effects of FMT which based on economic growth in China. This chapter is on the base of fourth chapter, and along the thread of change in economic variables→change in economic growth, tests the impact of FMT's adjustment on economic growth, reveals the law that FMT affects economic growth. First, constructing the model of the economic growth effect of FMT. Second, using China's data to estimate the parameters, and then measuring the variation of economic growth as change in FMT.Chapter VI is empirical analysis of macro-economic effects of FMT which based on business cycle in China.using impulse response function, variance decomposition function, distributed lag model and state space model to conducut the model about business cycle effect of FMT, fully reveals the law that FMT affects business cycle. First, On the base of IS-LM model, the multiplier accelerator model and money market equilibrium model, conducuts the model about business cycle effect of FMT. Second, introduces impulse FMT into response function, variance decomposition functions, distributed lag model and state space model to construct the econometric model about business cycle effect of FMT. Third, using fixed-parameter and time-varying parameters econometric models, empirically tests business cycle effect of FMT, reveals the long-term trend relationship between FMT and business cycle and reveals the law that FMT affects business cycle with the variation of time.ChapterⅦis empirical analysis of macro-economic effects of FMT which based on the steady-state level of the economy and the Golden Rule level in China. This chapter, under the view of the economic efficiency, using dynamic equilibrium, reveals the law that FMT affects the steady-state level of the economy and the Golden Rule level. First, examines the impact of FMT on the steady-state level of the economy. Second, examines the impact of FMT on the Golden Rule level.ChapterⅧis empirical analysis of macro-economic effects of FMT which based on FMT's income redistribution effect. This chapter empirically studies the role of FMT's income redistribution. First, from structural and overall perspectives, constructs the model of FMT's income redistribution effect. Second, empirically tests FMT's income redistribution effect. On one hand, from the structural perspective, calculating the progressivity of average tax rate of FMT among different income groups; its result shows that average tax rate of FMT is progressive. On the other hand, from the overall perspective, calculating the variation of pre-tax and after-tax Gini coefficient reveals the extent of FMT's income redistribution effect.ChapterⅨis conclusions and revelation. Fist, summarising the economic effects of FMT which is severed as a basis for policy recommendations. Second, from the short-term and long-term perspective, the author proposes to timely adjust the policies of FMT in the short term, and to promote the reform of FMT system in the Long term.Through an in-depth study on economic effects of FMT,this paper conduct a number of innovative exploration in the following aspects:(1) The broad perspective of researchThis paper explores the economic effects of FMT from the angle of micro and macro,efficiency and fairness, general equilibrium and dynamic equilibrium, etc. First, the author studies the price effect and scale effect of FMT on the micro level, and the impact of FMT on real economy at the macro level. Second, the author studies economic changes from the perspective of economic efficiency and effects of income redistribution from the perspective of social justice,which are caused by FMT. Third, the author studies the impact of FMT on macroeconomic variables from the perspective of Static equilibrium and steady-state economy from the perspective of dynamic equilibrium.(2) The in-depth of theoretical modelsFirst, constructing the model about bond price effect of FMT. This paper, using the general market equilibrium theory, introduces interest income taxation(abbreviate IIT) and stock transaction taxation(abbreviate STT) to the bond pricing model, and analysis the impact on bond price as changes of IIT's and STT's rate.Second, expanding the model about the consumption and savings effect of FMT. On one hand, the author uses CES utility function which can include Cobb-douglas utility function, Completely substitute utility function and fully complementary utility function, and introduces IIT and Price factor to CES utility function which deepen the existing model of consumption and savings. On the other hand, conducting the model about the consumption and savings effect of STT. Introducing SST and Price factor to CES utility function not only deepen the existing model of consumption and savings, but also it can consumption and savings effects of SST.Third, Constructing the model about economic growth effect of FMT. On the base of the Pagano's model which studied the impact of financial markets on economic growth, using the results that FMT affect consumption, savings and investment to conduct the model about economic growth effect of FMT.Fourth, Deepening the model about business Cycle effect of FMT. On the base of business Cycle theoretical models of Keynesian and monetary school (namely, applying the IS-LM model, the multiplier-accelerator model and money market equilibrium model), using impulse response function, variance decomposition function, distributed lag model and state space model to conducut the model about business cycle effect of FMT.(3) Depth of empirical research Through theoretical analysis, this paper empirically studies economic effects of FMT from different perspective using of large amounts of data and measurement tools.First, This paper empirically analyses the impact of FMT on bond market of China. The impact of the deposit interest income taxation(DIIT) and STT on China's bond market is rarely concerned by Schools. By using event study and GACH effect model, the author empirically investigates bond price and scale effects of DIIT and STT. The empirical results show that DIIT and STT affect significantly bond price and bond trading volume.Second, empirically studing the impact extent of FMT to consumption and savings. Existing research about consumption and savings effect of IIT is lack of empirical test, its conclusions are highly subjective. This paper uses theoretical model of the cross consumption, measurement tools and China's data to empirically study the impact extent of IIT on consumption and savings, and to gain more objective conclusions. The empirical results show that the substitution effect of IIT is greater than its income effect, Namely, increasing(lowering) IIT's rate cause people to increase(reduce) savings and reduce(increase) consumption; IIT generates different impact extent to rural residents and urban residents. The consumption and savings effect of STT is rarely concerned by Schools. This paper empirically analyses the consumption and savings effect of STT. The empirical results show that increasing(lowering) STT's rate cause people to reduce (increase) savings and increase (reduce) consumption.Third, empirically testing economic growth effect of FMT. Through empirically analysizing the effect of FMT on economic variables, the authou further empirically test FMT's impact on economic growth. The empirical results show that improving(lowering) IIT's rate promote(hinder) economic growth; reducing STT's rate inhibit(promote) economic growth, and the economic growth effect of STT has the nature of period.Fourth, from dynamic optimization perspective, using the parameter data of regression dynamicly simulate variation of steady-state consumption and steady-state capital,which is caused by the change of tax rate of IIT and STT.Fifth, By calculating the Gini coefficient, empirically studing income redistribution effect of FMT. From the structural perspective, calculating the progressivity of average tax rate of IIT, STT and dividend income taxation(DIT) among different income groups; its result shows that average tax rate of IIT, STT and DIT is progressive. From the overall perspective, calculating the variation of Gini coefficient before and after tax, and the result shows after-tax Gini coefficient of IIT, STT and DIT is smaller than their pre-tax Gini coefficient, namely, they have a positive effect of income redistribution.(4) The application of policy recommendationsFirst, the author raises short-term and long-term policy objectives of FMT in China. In the short term, the government timely adjusts the policies of FMT, which should focus on regulating FM and economic operation. In the long term, the government will reform the system of FMT, which should take into account efficiency and fairness to achieve the dual regulatory function, namely, to achieve regulating FM and the income gap.Second, from the long-term perspective, the author puts forward the idea of capital gains tax system, which based on that capital gains tax system can play dual regulatory function.