Empirical Study Of The Macroeconomic Effects Of Fiscal Policy In China

The National MACRO-CONTROL system is a huge andcomplicated system. It includes fiscal department, credit department,project department, labors department, price static department and so on.The financial which is an important integrated department is the mostsensitive, most quickly and most effective method toMACRO-CONTROL. Disputes over the effectiveness on fiscal policy arealways the hot topics in circle of macroeconomics. We make a closeempirical research on active fiscal policy in our country, and bring upsome advice in accordance with the present economic situation.In this article, chapter 1 gives a brief introduction to fiscal policy. Firstlywe introduce some conception about the fiscal policy and its effect .thenwe list some viewpoints of the West Economists on fiscal policy. Also welist some important and classical research on fiscal policy both overseasand native. And lastly we list the meaning of the fiscal police research onthe special stage of Chinese economical development.Chapter 2 gives an introduction of the basal theory about fiscal andeconometric. Firstly we class the financial policy to two kinds: the autostability and the discretionary policy. Then we use the IS-LM modelanalysis the macro effective bring by the policy. Then We review ourcountry's fiscal policies in implementation since reform and open-up.During the past 15 years since then, our government's macro- controllingto fiscal policy have obviously transformed. After experiencing thetransformation from planned economy to market economy, thedeveloping tendency of national economy become better and better. In1998, confronting with the problems of insufficient domestic demand anddeflation, our government issued active fiscal policy, so as to acceleratenational economy to develop steadily and healthily. Lastly we introducethe econometrical method we use in this article such as the seasonaladjustment X-12method, method of cointegration, and VARmodel, SVAR model, Variance decomposition model and so on.Chapter 3 mainly gives theoretical analysis and empirical research toeffectiveness of active fiscal policy. It's the most important part of the article. Firstly we make a brief judgment on the relationship betweenthe fiscal policy and the gross output through the figures about them.Then we make the cointegration model using the rate of tax, rate of fiscalexpenditure and the gross output, we conclude that output elasticity offiscal expenditure rate is 0.3775, it means that the fiscal expenditure canpromote the gross output, and we also analysis the output elasticity of taxrate is—0.4572, that says the tax can reduce the output. Then weanalysis the dynamic effects of fiscal policy through the VAR and SVARmodels. Comparative analysis of fiscal expenditure shock and tax revenueshock drove a conclusion that, the valid term of tax policy is limited andapt to cause violent fluctuations in output, so tax policy is unfavorable tosustain the stable development of economy. Compared with this,increasing fiscal expenditure can bring longer expansionary effect to theoutput, and doesn't exist repeated fluctuations.Charter 4 finally we make some important conclusion and someuseful advice to the goverment.