The China's Monetary And Fiscal Policies Impact On The Size Of The Underground Economy

Underground economy refers to the economic activities, which income is not declared to the government, and which is out of control of government and taxation management, and which output value is not included in GDP. As a side product of government's intervening economy, it exists all over the world. However, until the middle of twenties century, the western economic scholars began to pay attention to it and to make research on it. The attention to underground economy orients from the economic fact of the western countries'deflation. Feige and others tried to explain economic improper phenomena from the new perspective of underground. His underground assumption thinks that what to be inspected is economic facts, but not the economic theory. He remarked that there was a bigger and bigger part of economic activities which escaped from government's control and ungulate official information system. If the policy makers and the public react in accordance with the wrong data signal, this might result in the real economic improper. In the prevailing economic activities, underground economy has drawn economic scholars'and Chinese as well as foreign governments'close attention, although it owns the characters,such as information disclosure's insufficiency, the economic activities'being under cover,ect. In order to improve resource allocation's efficiency and to keep national economy under normal operation, we feel it necessary to strengthen research on the underground of its existing forms,its causes, its computing methodsand its influence on national economy. So that we can master the national economy's general development trend to effectively supervise underground economy, and to provide basis for economic policy decision to push forward social economic development.In view of the present research limited to the estimation of underground economy's scale, there is little research on underground economy's reaction to macro economic policy, and its influence on macro economic indicators. Therefore, this dissertation estimated China's underground economy's scale with consideration of China's economic characteristics, and probed the relationship between underground economy and macro economic policy, and the relationship between underground and macro economic indicators.The first chapter summarize the meaning and expression of the underground economy, and analyze the cause of the underground economy from the tax factors, monetary policy factors, fiscal policy factors, institutional factors and factors of population movements. In accordance with the illegal economy, undeclared economic and financial statistics to the underground economy is not divided into three categories, and were discussed the impact of the national economy in the presence of various underground economy.The second chapter full use the method of the cash ratio, GDP and gross domestic product segmentation to estimate the scale of the underground economy in year 1981 -2009. the results show that in the initial stage of reform and opening up, China has experienced Planned economy to market economy period, the scale of the underground economy is not stable, but as the 21st century, the overall size of the underground economy generally downward trend has stabilized. The results also show that the stability of our current activities in the underground economy, the macro control in our national is moderate intensity, macroeconomic policies is very appropriative.The third chapter use the models of MIMIC, and introduct the the inflation rate, unemployment rate, disposable income, the Engel coefficient, the intensity of government share of GDP and other exogenous variables. While selected real per capita GDP , flow cash and the ratio of M1 as Endogenous variable to further estimate the scale of the underground economy of China, and elimination of the error that caused in the three methods of the second chapter.According to the results of empirical research in the second and the third chapter, in the fourth chapter to presented some suggestions to governance the underground economy and made a conclusion.