Effect Of Government Debt On Monetary Policy Effectiveness

In the context of the financial crisis,the global economic depression has become evident.In order to stimulate economic vitality,the government sector has implemented expansionary fiscal policy to stimulate economic growth at the expense of large-scale government debt deficits.From a global perspective,the level of government debt in major global economies has risen significantly in recent years.Data from the IMF's 2016 fiscal monitor report shows that the proportion of gross debt of the general government of developed countries in GDP has risen sharply from 72.1% in 2007 to 108.58% in 2016.It is expected that the government debt of major developed countries will increase in the next three to five years.The level of the government debt will remain high.According to the guidelines for public debt management issued by the IMF(2014),government debt management should be independent with fiscal policy and monetary policy,and its policy objectives and tools should be different from fiscal policies and monetary policies.It can be seen that in the current implementation of government debt issues,government debt management practices give enough attention.Compared with the actual operation departments,the development of this part of the theory is lagging behind.Government debt management behavior is not adequate Embodied and described in majority literature.In the theoretical framework of academic research,there is still relatively little independence of government debt variables.Therefore,the independent study of government debt factors has an important significance in the theoretical study.This paper starts from a basic DSGE model,introduces the government debt scale variable in the total demand equation,and considers the ?inverted U? type relationship between government debt and economic growth,and builds a DSGE model that includes home,business,and government.Based on the improved new model,this paper takes the combination of passive monetary policy and active fiscal policy as the object of analysis,compares the response path and degree of fluctuation of inflation rate and output to the shock of monetary policy under different government debt scales.In order to examine the effect of government debt factors on the effectiveness of monetary policy.The results show that:(1)Under the combination and combination of passive monetary policy and active fiscal policy,taking into account the wealth effect of government bonds and the inverted U-shaped relationship between the scale of government debt and output,tightening monetary policy shock will increase inflation;moreover,when government debt is below a certain level,the impact of monetary policy on inflation will increase as the size of government debt increases,and when the size of government debt exceeds a certain level,The impact of monetary policy shocks on the inflation rate will decrease as the size of government debt increases.At the level of different levels of government debt,the impact of monetary policy shocks on output also shows similar characteristics.(2)The degree of fluctuation of macroeconomic variables caused by the impact of monetary policy is also affected by the size of government debt;the scale of government debt is different,and the sensitivity coefficient of output to government debt is different,output gap and the variance of inflation rate exists.difference.This means that the central bank must fully consider the impact of changes in government debt on the effectiveness of monetary policy when formulating monetary policies.