The Empirical Study Of Fiscal Policy Effect On Price In China

How to decide the price level and how to control the inflation has always been the concern of economists and government departments.In order to provide the appropriate measures to maintain price stability,we must make relevant determinants of price clear.Proponents of monetary theory believe that inflation is a monetary phenomenon.However,some economists found that in certain years some countries appeared the phenomenon that low inflation and high money supply growth coexist at the same time.Because these economic situations are not explained by the traditional monetary theory,Fiscal Theory of the Price Level(FTPL)put forward in 1990s emphasizes that the fiscal policy is an important factor to affect the price level.This theory from a new perspective to explain the cause of inflation and question the monetary theory,and the theory emphasis on fiscal factors rather than monetary factors play a pivotal role.So this paper considers that how to decide the price level in our country from the angle of view of the fiscal policy,including two aspects of theoretical model and empirical test.In theory,this paper describes FTPL of the development process,introducing weak form of FTPL and strong form of FTPL in detail on the one hand;and this paper analyses of the possible transmission route of China's fiscal policy on price level on the other hand.In empirical aspect,this paper uses MSVAR model to text policy properties in our country by recognition methods put forward by CCD.The empirical results show that the influencing factors of inflation in China have transferred.between 1980 to 1998,monetary factor is the main factor of price increases;between 1999 to 2014,fiscal factor become the main factor that decided to rising prices.In order to further study the concrete situation of China's inflation in recent years,this paper then picks up the quarterly data between 1999 to 2014,using the state space model to test the applicability of Ricardo equivalence theorem in China,and finds Ricardo equivalence theorem is not established,which means fiscal policy has the effect of economy and has the effect on price.In addition,the SVAR model is used to compare the effect of monetary policy and fiscal policy on the regulation of prices,the results show that monetary policy has a tiny effect on the inflation fluctuation of China and the fiscal policy has a significant effect on the change of inflation in recent years,which means that China is not in the Ricardian system in recent years.This means that the financial and monetary authorities not only need to pay attention to the impact of inflation inertia on the policy effect,but should pay attention to the formulation and implementation of fiscal policy to carry out reasonable collocation of fiscal policy and monetary policy to control the price level of China effectively.