Chinese-style Separation Of Powers, Endogenous Fiscal Policy And Macroeconomic Stability: Theoretical And Empirical

It tries to construct a Macro-Control framework to be beneficial to scientific development for Chinese government, whose theoretical framework is constructed by answering three basic problems as follows. The first one is, when confronted with macroeconomic destability, what kinds of policy mix a benevolent government should adopt? The second one is, why would Chinese local government adopt expansion-biased fiscal policy not to be beneficial to macroeconomic stability? The third one is, how should we ensure that Chinese local government would act as a benevolent government?Through surveying the fiscal theory of price level and its policy suggestions, Chapter 2 answers the first problem, that is, a benevolent government should generally adopt a policy mix of active monetary policy and local Ricardian fiscal policy in normal times; a policy mix of passive monetary policy and non-Ricardian fiscal policy in abnormal times.Based on the literatures concerning the theme, Chapter 5 provides a theoretical hypothesis that expansion-biased fiscal policy is interactive outcome of Chinese-Style decentralization and deficient institutional constraints. It is a key of the second problem.Chapter 6 tries to make Chinese local government act as a belevolent government from the three dimentions repectively, changing governance mode of Chinese style decentralization, revising Budget Law and enhancing fiscal transparency. We suggest central government should adopt political performance assessment mechanisms that economic stability is priority and the public's demand should also be taken into consideration.However, it thinks that an effective Macro-Control framework should have its empirical foundation. Therefore, it tests FTPL's applicability in China and expansion-biased fiscal policy hypothesis respectively. Empirical results show that each theory has been verified well. Concretely speaking, according to Sala's VAR and Kim's SVAR , Chapter 3 finds the following formal empirical evidences that support FTPL from different perspectives , respectively, (1) in overwhelming majority of time, real interest rate responds to a positive shock of real revenue from tax positively;(2) there are significant reverses both inflation and output growth rate. Based on an annual unbalanced panel over the period of 1994-2004 and Probit model, Chapter 5 finds government competition's marginal effect on expansion-biased fiscal policy is a diminishing function of anticorruption index.Besides, it also discusses credible key of deflation-growth puzzle in China and thinks that based-FTPL hypothesis may improve demand-deficiency hypothesis from policy-mix perspective. It shows that it is very important to have a reasonable policy mix.