Empirical Study On The Impact Of Macroeconomic Uncertainty On Fiscal Expenditure Risk

As the Third Plenary Session of the 18 th Central Committee of the CPC stated,finance is the foundation and an important pillar of state governance.Thus,it is required by the modernization of the national governance system and capacity to strengthen fiscal risk management and maintain even running.Under the background of the ‘New Normal' of economic slowdown,the chronically accumulated structural contradictions are emerging and various uncertainties are multiplying,which leaves fiscal risk of ‘New Normal' including enlarging budget deficit and rising national debt to public finance.Especially,the risk that fiscal expenditure is confronted with is more severe.The reasons are the rigid expenditure growth accompanying economic prosperity and growing demand for public service,stochastic impact from macroeconomic uncertainty and the interior institutional inefficiency brought by improper decision-making and poor regulation.Therefore,it is of great importance,both theoretically and practically,to conduct research on the transmission channels of the risk of fiscal expenditure,the specific cause of risk spreading and the construction of risk warning model.Based on the study of predecessors,the article mainly uses the combination of theory and demonstration to emphatically analyze the impact of macroeconomic uncertainty on the risk of fiscal expenditure.As for the risk of fiscal expenditure,it refers to the possibility that the fiscal expenditure cannot be realized or the expenditure cannot be controlled.As for macroeconomic uncertainty,it chiefly analyzes the impact from the perspective of interaction of macroeconomic variables.Concentrated on the above two concepts,firstly,clarify the relevant definitions and theories,presenting two paths,exogenous and endogenous,of macroeconomic uncertainty influencing fiscal expenditure risk.The former primarily refers to exogenous shocks caused by macroeconomic uncertainty under the mechanism of automatic stabilizers and discretionary,and the latter primarily refers to the risk generated in the process of interaction of fiscal expenditure and other macroeconomic variables under the condition of uncertain expectation and incomplete information.Secondly,analyze the status of China's risk of fiscal expenditure,major uncertainty of macro economy as well as the interaction between the two factors.Thirdly,a vector auto regression model is build,correspondingly incorporating five endogenous variables including fiscal expenditure,economic policy uncertainty,unemployment,private fixed assets investment and net exports,with the impulse response function analyzing the dynamic relationship between variables.And the results indicate that the expansion of fiscal expenditure itself will increase the risk of fiscal expenditure as a representation of rigid expenditure growth,that the uncertainty of policy and unemployment will increase the risk of fiscal expenditure while the advance of private fixed assets investment and net exports will decrease the risk on the contrary,and that the impact of macroeconomic uncertainty on fiscal expenditure risk is sustained.Then three conclusions are drawn that to consider the impact of macroeconomic uncertainty when designing the warning model of the risk of fiscal expenditure,to avoid inefficient fiscal expenditure with more prudent decision and to encourage and guide private investment to reduce the fiscal expenditure.Finally,utilizing the findings of the empirical analysis,the vector auto regression model and the risk measurement model are combined to construct the dynamic warning model of the risk of fiscal expenditure.That means predicted values computed via the vector auto regression model are put into the risk warning model to achieve the goal of monitoring the fluctuations of fiscal expenditure risk under the condition of macroeconomic uncertainty.