An Empirical Study Of Financial Policy Of The Price Level

The price level has always been the research focus of the economics profession. There are two main views in the field of Price Level Theory:Money determinism and Fiscal determinism. Currency determinism holds the point that fiscal plays a decisive role in price level decisions. The quantity theory of money provides a simple way of thinking to stabilize price, if the output increases in the annual percentage of y and the amount of money supply increases in the annual percentage of u, then the price will be increase at the rate of u-γ in a sufficiently long time. Therefore, the government can control the money supply to decide the price, but the amount of the money that the residents are willing to hold is also affected by many other aspects, it depends on their anticipation about the future inflation, and the anticipation will affect the current the current price. Do we can control the price through fiscal policy, such as tax or debts policies joint monetary policy? Financial theory is an attempt to consider the stability problem through another angle.We can find that China’s inflation rate and the growth rate of the money supply is not always one-to-one relationship between the rate of inflation and the money supply in many years the relationship is exactly the opposite through the analysis of the relationship between China’s inflation rate and money supply. This may be caused due to the time lag of monetary policy is also possible that fiscal policy has played a role in which. This paper considers the price of our decision problem from the point of view of fiscal policy. In this paper, based on the decisions fiscal theory of the price level (FTPL) by selecting data from different years to test the FTPL applicability in China, the results support our financial system is a Ricardian regime. It is means that our country’s price level is mainly decided by monetary policy. But we couldn’t overlook the role of fiscal policy. The empirical results later in this article can show that fiscal policy affects prices from the deficit, spending, taxes and other.