Study On The Relationship Between The Fiscal Deficits And Economic Growth In China

Fiscal deficit is a governmental budget phenomenon can be widely found in nearly all different social and political systems and levels of economic development of the country. The fiscal deficit is as an important economic variable to the government during the macroeconomics control, the active fiscal policy is also one of the most significant approaches in the macroeconomics control. The history of the fiscal deficit is not so long. During the economic crisis in1930, it is the revolutionary Keynesian fiscal policy saved the economic from depression. Since the "Keynesian revolution", throughout the world, in a sluggish economy or the development of mitigation time, the government will be to expand fiscal spending and expand the consideration of the fiscal deficit to promote economic recovery, however, the successful revolution has appeared a larger controversy at a later stage. Out of the "Great Depression", the U.S. economy into a "stagflation", the effectiveness of its economic growth has been widely questioned. Especially since the global financial crisis in2008due to the U.S. subprime mortgage crisis. Every major country in the world spontaneously expands the size of the deficit, in order to promote economic recovery through the expansion of fiscal expenditure. However, the delay in the doldrums of the U.S. economy, the European sovereign debt crisis made people wonder the deficit fiscal policy.Since the reform and opening up, China has gradually established a socialist market economic system. In order to adapt to the development of economy and reform, China basically is a discretionary fiscal policy. The Fiscal deficit is accompanied with the appearance of expansionary fiscal policy. In particularly, since1993, China’s economy experienced inflation, deflation, then economic overheating, structural problems,2008financial crisis, the economy is too cold, in the corresponding, the fiscal policy has also conducted four big adjustments. Have implemented a moderately tight fiscal policy, a proactive fiscal policy and prudent fiscal policy and a proactive fiscal policy, in this several big adjustment, the scale of the fiscal deficit showed a trend of increasing year by year. Especially since the implementation of the proactive fiscal policy in2008, China’s fiscal deficit increased year by year, in2013. the central government will projected a deficit of1.2trillion Yuan. There is no doubt that the fiscal deficits have played a certain role in alleviating the financial burden of our country and the economic development and institutional reforms. But as far as the previous practice experience in China. The characteristics of fiscal policy short-term quick impact for a long time, making difficult to control the size of the deficits in the process of regulating the implementation effect. In the process of expansion and contraction of fiscal policy, there have been the phenomenon of the overheating of the economy and economic "hard landing".History is similar, but never repeat. We have to think about the following questions:How to objectively evaluate the economic effects of China’s fiscal deficit policy? The fiscal deficit policy have any effect on China’s economic development and what is the effect mechanism of action? The deficit whether have harmful effects on economic growth? How do we observe and prevent or eliminate the hazard? In The future how fiscal policy should be implemented? All these problems need further research in order to provide theoretical basis and analysis tool and the empirical analysis for the appropriate fiscal policy implemented. In order to solve these problems, In this paper, from the point of view of both theoretical and practical to test the relationship between fiscal deficit and economic growth. Thus we sum up the fiscal deficits have effect on economic growth in the focus on the points. And through theoretical and empirical testing, get the certain conclusions of the deficit on economic growth effects.This paper consists five chapters according to the author, as follows. Chapter one introduces the background and significance of the topic choice and research purposes, and the summary of the existing research. The second part introduces the four different fiscal deficits in schools of western economics theory, and make a summary. Chapter three is the practice of China’s fiscal deficit policy analysis, Preliminary comb China’s economic development and fiscal deficits since the reform and opening up. In conjunction with the second part of the theoretical analysis. the author thinks the Keynesian suitable for China’s fiscal deficit. Then searches in the effectiveness of the fiscal deficit when it acts on the economic growth. Chapter four has an empirical test of the relationship between the fiscal deficit and the economic growth. Mainly includes two parts, first test the effectiveness of the mechanism of action of the economic growth of China’s fiscal deficits, and then directly verify the relationship between fiscal deficits and economic growth. Mainly through the unit root test, co-integration test and granger causality test. Concluded that there is a long-term equilibrium relationship between economic growth and fiscal deficits and in the short term between economic growth and fiscal deficits are granger reason, but medium-term economic growth is the granger cause of the deficit, the fiscal deficit is not a granger cause of economic growth. This paper argues that fiscal deficits in the short term has certain effect on economic growth, but the middle is not working, so in the end still needs to fade out.And the practice of China’s fiscal deficit need further integration of China’s economic realities and macro environment, also pay special attention to the budget deficit risks. After the examination of theoretical and empirical analysis, this article intends to provide some meaningful reference for the practice of China’s fiscal deficit policy.