Fiscal Policy And Price Stability

In the system of market economy, the price mechanism is the core of market economy. Price fluctuation will not only involve in the market the adjustment of the interests between various economic subjects, but also affect the healthy and stable operation of the national macroeconomic. Therefore, it is one of the main goals of government macro-control to achieve price level stability. Although traditional monetary quantity theory believe that the price level is determined by monetary policy, since the1990s, however, when the price determined by the level of fiscal theory(FTPL) appeared, once again caused the people to rethink about price level decision.In this paper, after reading and carding a large number of domestic and foreign research literature, I found that the existence of the theory of domestic and international scholars are controversial. The main reason is the different empirical methods, a method is to directly introduce variable budget surplus and debt balance to research the effect of budget surplus to debt balance; another method is divided into cyclical components and structural components of the budget surplus to analyze of the impact of these two components of debt balance. Therefore, the paper is based on the review and evaluation of foreign research literature; draw lessons from the empirical test methods and reference the two different test methods, and use of empirical data in China to empirical the existence of FTPL theory in China. Then, the paper is from two aspects of fiscal expenditure structure and tax structure to explore the impact of different fiscal expenditure and tax structure on price mechanism, and then take advantage of our1994-2011years fiscal expenditure, tax revenue and the consumer price index data, and establish a SVAR model to test of fiscal expenditure and income tax on the price of the effect. Finally, based on the results of the theoretical analysis and empirical test, this paper from the perspective of fiscal and taxation policies to realize stable price level of policy ideas, and thus for the government to stabilize prices level and control inflation provide new ideas and theory support to decision making. This paper is divided into five chapters:the first chapter is introduction, which mainly introduces the background and significance of the topic, dynamic and evaluation of foreign and domestic research as well as research methods. The second chapter is the theory of FTPL and the existence of the test in China. First, the chapter has carried on the review and evaluation to FTPL theory, and followed by analysis of the FTPL theory test methods of controversy. Finally, it references to foreign inspection methods, uses the empirical data empirical FTPL theory existence in China, and analyzes the result of empirical test, puts forward policy recommendations. The third chapter is impact of the fiscal expenditure structure to the price level. The chapter introduces the fiscal expenditure structure on the mechanism of the price change; secondly, according to the empirical data that fiscal expenditure can be divided into purchase expenditure and transfer expenditure, and then establishing an including purchase expenditure, transfer expenditure and consumer price index variables SVAR model; the final is model estimation and the result analysis. The fourth chapter is tax structure influence on the price level, first it introduced the tax structure of the mechanism of the price change; secondly, according to the empirical data that tax structure is divided into commodity tax, income tax, property tax and other tax, and then establishing a containing commodity tax, income tax, property tax and other tax and the consumer price index SVAR model; the final is model estimation and the result analysis. The fifth chapter is conclusion and policy recommendations, which is the end of the paper. First of all, it combines with the analysis of the above and puts forward policy suggestions from the perspective of fiscal expenditure structure to optimize China’s fiscal expenditure structure; secondly, it puts forward policy suggestions to perfect the tax system from the perspective of tax structure.