Policy Coordination For "Stabilizing Economy" Under The Development Of Digital Finance

Fiscal policy and monetary policy are important policy instruments that balance aggregate and structural aspects to ensure long-term economic stability,and both policies occupy a dominant position in the country’s macroeconomic regulation and control.China’s macro policy control programme for 2023 emphasizes the need for fiscal and monetary policies to be coordinated to form a synergy to promote stable and high-quality economic development.In particular,when implementing active fiscal policy,emphasis will be placed on the coordination of tax support tools with fiscal expenditure tools.At the same time,when implementing a precise and strong prudent monetary policy,attention should be paid to the integrated use of a variety of monetary policy tools to jointly maintain a reasonable abundance of market liquidity.However,in reality,the effect of fiscal policy and monetary policy synergy in stabilizing the economy has not fully met expectations,probably because of the following reasons: firstly,there are contradictions in the way the two policies are combined or the combination is not sufficient,such as the lack of attention to improving the coordination of internal tools of a single policy before the synergy of the two policies,as well as the inaccurate positioning of functions and unclear division of regulation and control when the two policies are combined;secondly,the "The development of the economic situation exceeded the expectation of policy development,which led to deviations in the focus of policy synergy and reduced the accuracy of the effect of policy synergy;thirdly,the continuous development of digital finance had a transformative impact on the regulatory framework of fiscal and monetary policies.Some policy instruments have been strengthened and their transmission channels have been unblocked,while others are in danger of being replaced and their transmission channels have become more complex,resulting in changes in the effectiveness of policy synergy.The studies that have been conducted to address the above causes of the poor synergy between fiscal and monetary policies are still lacking and cannot provide continuous support for improving the coordination and control framework of fiscal and monetary policies in China.Based on the above background,it is important to investigate the changes in the synergy between fiscal and monetary policies,social welfare and the incidence of economic risks before and after the introduction of digital finance,with the objective of "stabilizing the economy",so as to obtain a more optimal and time-varying policy synergy.This study explores this issue by designing each chapter in a logical way,with a step-by-step approach towards finding superior policy synergies.Firstly,based on the existing literature and theoretical foundations,it identifies the policy application scenarios of digital finance development,the evolution of economic stability evaluation indicators,as well as the content of objectives,rules,tools and transmission channels of fiscal policy,monetary policy and their synergy in regulating economic stability,and proposes the design of research ideas according to the key elements,with a view to presenting the value and innovation of the research.The second is to expand and optimize the existing criteria for judging economic stability under the objective of "stabilizing the economy" and its realistic requirements,and to test the reasonableness and relevance of the indicators,with a view to finding the focus point for the concerted efforts of policies to "stabilize the economy".Then,based on the focus and weaknesses of economic stability objectives,a five-sector NK-DSGE model with three social organization structures,low-income and middle-and high-income households,and fiscal and monetary policy synergy rules is built to evaluate the effect of five policy synergy models in stabilizing the economy,in order to obtain the advantages and limitations of different policy synergy solutions.Again,the digital financial development element is introduced into the NK-DSGE evaluation model of the policy synergy effect to further compare the changes in the stabilization effect of policy synergy,with a view to finding the optimal policy synergy model.Finally,conclusions,policy implications,research gaps and directions for further research are presented around the research focus.The study is based on the logical chain of "the key and weak links of ’economic stabilization’ → policy synergy to deal with them → digital finance influences the effect of policy synergy → the advantageous solution of policy synergy",so as to achieve a comprehensive test and analysis of various synergy models of fiscal policy and monetary policy.The study also examines and evaluates a variety of synergistic models of fiscal and monetary policies.The main findings of the study are as follows.Firstly,under objective of "stabilizing the economy",the findings of the continuous development and expansion of economic stability evaluation criteria are analyzed.On the whole,China’s economic stability has been improving,but there are still weak points.On the aggregate level of economic stability,economic growth is basically stable and moderate inflation contributes to the main driving force of economic stability,and research shows that at this stage,China is basically not likely to have stagflation crisis,large-scale supply and demand crisis and large economic and financial risks.In terms of the structure of economic stability,structural imbalances in the economy still exist,and the dynamics of stability in various segments of the economy are not consistent,which makes it easy to lose the accumulated results of previous stabilization.For example,the economic environment can maintain stability because it is often monitored and regulated by macro policies,but the stability of the corporate sector and the financial intermediation sector fluctuates more,while the fluctuations of indicators in the residential sector are not given due attention.In terms of the sectoral correlation of economic stability,all four sectors are so closely linked in terms of stability that stability or risk in one sector can easily be transmitted among other sectors to create stability in economic system or systemic economic and financial risk.The second is an analysis of the findings of the economic stabilizing effects of the five synergistic models of fiscal and monetary policy.On the whole,the two intra-policy and three inter-policy synergy models differ in their economic stabilizing effects in any kind of social structure,with the five policy synergy models being the most effective in a pyramidal social structure.Comparing the stabilizing effects of intra-policy synergies,we find that the monetary policy mix is more supportive of aggregate indicators such as growth and inflation than the monetary policy mix,while the fiscal policy mix is more effective in stability of the economic structure,such as boosting the investment dynamics of enterprises and residents,reducing the burden of financing and promoting science and technology innovation.Comparing the economic stabilization effects of inter-policy synergies,we find that the "fiscal-led and goods-supported" rule is more effective than the "goods-led and goods-supported" rule,and the "fiscal-parallel" rule is the most effective.The best results were found for the ’finance and goods in parallel’ rule.When comparing the effects of intra-policy and inter-policy synergy rules,it is clear that a coordinated combination of the two policies is more effective in stabilizing the economy than a single policy combination.It is true that there are limitations to any kind of policy synergy rule,such as the inability to completely eliminate the risks of relative recession,high inflation,slowing technological progress and corporate financing difficulties.Third,after the introduction of the policy synergy analysis framework in digital finance,the findings of the analysis of the changes in the stabilizing economic effects of the five synergistic models of fiscal and monetary policy are presented.On the whole,the evolving development of digital finance can make the synergy between fiscal and monetary policies more flexible and further consolidate the effect of policy synergy,which not only has a prominent role in enhancing the effectiveness of monetary policy and reducing its negative impact,but also has the potential to be explored in enhancing the precision and sustainability of fiscal policy.Comparing the intra-policy synergy effects of digital finance,we find that the effect of the monetary policy mix has been significantly enhanced and is gradually approaching that of the fiscal policy mix.Comparing the effect of digital finance on the economic stability of inter-policy synergies,we find that the "fiscal-goods parallelism" is still the best performing policy synergy rule,while the effect of monetary policy-led inter-policy synergy rules is significantly enhanced,and similarly,the economic stability effect of different policy combinations is still stronger than that of single policy combinations.Moreover,compared to the period before the introduction of digital finance,digital finance amplifies the synergistic effects of fiscal and monetary policies,saves policy space,reduces the incidence of negative policy synergies,and enhances the long-term trend of economic stability.Fourthly,the research focuses on the main line of "the key and weak points of ’economic stability’→policy synergy to deal with → digital finance affects the effect of policy synergy",and provides policy insights on how to build an effective and flexible framework of fiscal and monetary policy synergy and regulation.It covers three aspects: the development and governance of economic stability,the optimization of the effect of policy synergy in stabilizing the economy,and the direction of digital finance to enhance the effect of policy synergy in stabilizing the economy.