Study Of The Dynamic Efficiency Of The Chinese Economy Under The Financial Perspective

It is very important to do the research on dynamic efficiency for every country. Theoretically speaking, the fiscal policy and the monetary policy all depend on the value of capital stock which can be well described by the recent research on dynamic efficiency. When it is dynamic inefficient, the government should reduce the expenditure on investment, but if not, the government may do the opposite. This rule is also useful in china, but the research on this field is relatively little, it seems that researchers have not realized the importance of it, so I hope this paper may contribute something in this field.There is not a dominating conclusion on this topic by now, as researchers applied many different methods to get their conclusion. My paper has used some of the property of those earlier papers, but it conducted a more convincing way to formulate my conclusion. I put forward tow conflicting ideas and introduced two different researching methods at the beginning, then I tried to prove that the latter idea of those two is more acceptable by specifying the opposite conclusion of some earlier researcher, which was conducted by the same way of data processing. The result showed that the provinces (eg.Shanghai,Guangdong) into which more labors have immigrated are dynamic efficient, but those of the opposite are dynamic inefficient. After that I do the regress of China product function by selecting Henan, Guangdong,Shannxi as the representation of China, the result of the regression imply that China is performing well on the economic dynamic efficiency. In order to make it more convincing, I built an VAR model on real GDP and the growth of non-agriculture labor, the result showed that there is cointegration relation between them and the latter is the Granger reason of the former. That tend to indicate labor supply is the important reason why China is still dynamic efficient while the investment is growing rapidly., The sufficient labor supply can weaken the capital deepen.After demonstrating that China is performing well on dynamic efficiency, which is an important factor when the government makes its fiscal policy, I built another VAR model about public investment, private investment, interest and price index to show that there is no crowding-out effect in China so that the government can stimulate the investment by expending more money without worrying about crowding-out effect as well as the dynamic inefficiency.