Study Of Fiscal Policy Shock And Macroeconomic Monitoring Under The Policy Uncertainty Perspective

Since the founding of the P.R.C,our fiscal policy has insisted on a balanced budget or prudent path.Beginning in the late 20th century,China's government has been implementing two rounds of proactive fiscal policies,which have made remarkable achievements in promoting the sustained and sound economic growth.Thus,to scientifically summarize the historical experience of fiscal policies has important significance for guiding the practice of government departments.While the government uses the countercyclical proactive fiscal policies to carry out macro regulation,the influence of economic policy uncertainty(EPU)is also arousing more and more public attention.However,the existing research generally ignores the policy implications behind the EPU.This paper analyzes the impulse response of fiscal policy shocks under different policy uncertainties by employing sign-restriction vector auto regression model,and finds that proactive fiscal policies in the context of rising policy uncertainties will lead to increased economic volatility in China.Therefore,it is necessary for the government to make rational planning of macro regulation and revealing relevant information about future policy in advance based on the work of macro-economic monitoring and forecasting.Scientifically monitoring and forecasting of macroeconomic conditions are of crucial importance to government's macro regulation.Along with the explosive growth of data information in the era of Big Data,economic models that contain only a small number of variables are unable to meet the requirements of policy making for government and other economic entities.At the same time,the econometrical theories and methods applicable to the analysis of high-dimensional data have been developed quickly.As a frontier method in the field of econometrics and big data analysis,the dynamic factor model has become a mainstream method of economic monitoring in academy and constantly renewed its vitality.This paper studies the macroeconomic monitoring in China based on the dynamic factor model,specifically focuses on three aspects,the macroeconomic prosperity,core inflation,and macroeconomic uncertainty.Firstly,a study on the monitoring of China's macroeconomic prosperity.Based on economic implication and practical significance,this paper picks out 22 quarterly and monthly mixing indicators that can better reflect and forecast the macroeconomic conditions in China,and uses the dynamic factor model to construct the macroeconomic sentiment index.In this paper,we first examine the applicability of two dynamic factor estimation methods,that are,EM algorithm which can handle the high-dimensional mixed-frequency and the third-generation factor estimation method,in China's economic boom monitoring problem.It is found that the third generation factor estimation method is more suitable for economic prosperity monitoring and factor extraction based on the specific characteristics of China's mixed high-dimensional macroeconomic data.Then,this paper constructs the macroeconomic sentiment index from September 1993 to June 2017 on the basis of the final data of the mixed variable set(ie,all available data until July 2017)and the third generation factor estimation method,and finds that the calculated macroeconomic sentiment index is in good agreement with the reality of China's economic development and better reflects the economic conditions at different stages of economic development.Furthermore,this paper collects real-time data sets and use the third-generation factor estimation method to monitor the real-time economic conditions based on available data at specific time points,and reports the economic results from March 2014 to July 2017 at the end of each month.The real-time monitoring result of prosperity shows that the economic sentiment index of our country has stabilized and picked up since 2016.Secondly,the research on monitoring China's core inflation.Headline inflation is too much noisy to be a monetary policy target,it is necessary to conduct studies on core inflation that reflects the common trend of all commodity price changes.By introducing time-varying factor loadings,stochastic volatility and outliers adjustment into the framework of traditional dynamic factor model,this paper build a univariate UCSVO model based on aggregate CPI index and a multivariate UCSVO model based on eight categories of CPI index and consumption expenditure.The result shows that:The turning point of core inflation estimated by the UCSVO model is ahead of the CPI YoY index of about 6 months and is suitable for real-time monitoring of China's inflation.CPI categorization weight under the MUCSVO model has the characteristics of being proportional to price stickiness and inversely proportional to volatility,which are consistent with the calculation methods based on"welfare loss" and "volatility".While measuring the e trend of CPI of eight sectors and aggregate core inflation,the MUCSVO model can also accurately reflects the evolution characteristics of disaggregated CPI components and provide more detailed information for the government and other economic entities in policy making and economic decision-making.Thirdly,a research on the monitoring of macroeconomic uncertainty.Under the background of new economic situation,it is of great practical significance to accurately measure the level of the macroeconomic uncertainty in China and to study the impact of the uncertainty.In this paper,we use the common factors of the total economic information set composed of 65 variables as the explanatory variables,and make prediction of every variable in the macroscopic variables set composed of 27 variables by dynamic factor model,and then construct the monthly macroeconomic uncertainty index of our country from September 2005 to December 2016 based on the forecast error.In this way,the indexes built in this paper can overcome the problem that a single economic sequence can not reflect the whole macro-economy comprehensively.Thus,the uncertainty index calculated has many good.statistical characteristics,and it accords with the reality of China's economic development.Further empirical analysis shows that the impact of macroeconomic uncertainty will have a significant negative impact on China's economic prosperity and employment.