The Analysis Of China's Fiscal And Monetary Policies' Validity And Selection

Given the condition of modern market economy, government would usually interfere with economic development using various kinds of means and instruments, and hence fiscal policies along with monetary policies have become the most two important and most frequently used means, therefore the issue of their validity and selection has gained more and more concerns. Chinese government has intended to fine-tune our economy with both policies, and the issue of their validity and selection has inevitably become a hot debate among both academe and government departments. This article has observed the movement of real interest rates, which is one of the intermediate instruments, and evaluates the validity of our actions based on this criterion. What's more, the issue as how to select our policies and to improve their validity according to new economic environment has been brought forward.This article is divided into four parts. Chapter I introduces the theories on validity analysis and selection of fiscal and monetary policies. It can be divided up into three sub-parts. Section I introduces the practice in United States, and concludes western theories on evaluation and selection. Ever since the publishing of Keynes' famous book General Theory of Employment, Interest and Monetary in the 30s, western theoretical circle has been carrying out a great deal of research, and there has been a long controversy between different academic schools, which have also cultivated all kinds of opinions and propositions. Amongst the controversy, the most representative argument should be the one between Keynes' doctrine and monetary doctrine. Keynes' doctrine thinks that fiscal policies are superior to monetary policies in terms of promoting economic development; on the contrary, monetary doctrine objects to discretionary fiscal and monetary policies. Section II introduces M-F model under incomplete liquidity of capital flow. M-F model is' an advance of IS-LM model, which is applied to the analysis of internal and external equilibrium of small economic country in open condition. For those who implements fixed exchange rate regime, the incomplete of liquidity of capital flow would not weaken the extrusion of expanding fiscal policies, therefore, expanding monetary policies is comparatively more efficient; while on the other hand, the complete liquidity of capital flow will weaken the extrusion, therefore, the validity of expanding fiscal policies will be greatly improved. Section III introduces the features of our product market, monetarymarket and capital market. Based on it, a modified M-F model has been brought out which is more in line with our markets' features theoretically.Chapter II evaluates our practice of fiscal and monetary policies, and it's divided into two parts. Section I is a retrospect of our practice since 1992. The period has been divided into three parts, and of course the content of each practice differs from one another. Section II firstly introduces the prevailing opinions on the practice in the theoretical circle, and then we testify the conformity between our real situation and M-F model under incomplete liquidity of capital flow based on the comparative analysis of theoretical real interest rates and real interest rates. Consequently, we use this model to analyze the validity of our practice.Chapter III mainly analyzes the factors that will have impact on the validity of the policies, and it's divided into three parts. Section I analyzes the factors that influences the validity of monetary policies, including the independence of monetary policies, the rationalization and degree of quantification of targets, the transmission efficiency of monetary policies, the liquidity of capital flow and the transparency of the policies. Section II analyzes the factors that will have impact on validity of fiscal policies, including the relocation efficiency of resources, the restriction on economic development, marginal tendency of consumption, the validity of fiscal expenditure on inducing domestic consumption and investment and the...