Research On Macro-economic Effects Of Chinese National Debt

At the beginning of 2020,the sudden global outbreak of the new crown epidemic caused negative growth in major global economies.As the only country in the world to achieve positive economic growth,the support of the national debt policy to the Chinese economy cannot be ignored.From June to July 2020,the Ministry of Finance of China completed the issuance of an additional 1 trillion RMB anti-epidemic special treasury bonds for using in epidemic prevention and control and economic development.As one of the main sources of national fiscal income,national debt can make up for the government’s fiscal deficit,raising construction funds,ensuring the construction and implementation of major national engineering projects,and can effectively cooperate with the government in counter-cyclical adjustments,stimulating investment and consumer demand.It plays an important role in improving the progress of economic system reform of China and keeping Chinese economy being stable.From historical perspectives,the successful experience of the United States in responding to the Great Depression made the Keynesian government use fiscal policy to intervene in the macro economy.Since then,major economies in the world have begun to use the issuance of treasury bonds to finance fiscal deficits to support government fiscal expenditures.The adjustment of fiscal expenditure level realizes counter-cyclical adjustment of the country’s macro economy and achieves the three major fiscal policy goals of adjusting resource allocation,income distribution,and economic stability and growth.As an important part of fiscal policy,the national debt policy also has three major policy goals for adjusting resource allocation,income distribution,and economic stability and growth.The main goals of the current macro-control of governments around the world are economic growth,employment levels（residents income levels）and stable inflation levels.The specific impact of the national debt policy on economic growth,employment levels,and inflation,the impact mechanism,success or failure experience,and the consistency with macroeconomic goals have important guiding significance for the future adjustment and improvement of the national debt policy.In addition,from the perspective of monetary policy,with the continuous development of Chinese inter-bank market,a sufficiently large stock of national debt provides the central bank’s open market business with a tool foundation for implementing monetary policy.The central bank of China controls the money supply by buying and selling government bonds through open market operations and treasury bond market making.Thereby,implementing a more effective monetary policy,making treasury bonds have both fiscal and monetary attributes,and become a connecting link for the interaction of fiscal and monetary policies.At the same time,the re-listing of China Treasury Bond Futures on the China Financial Futures Exchange in September 2013 marked that Chinese treasury bond development has entered a new stage and laid the cornerstone for China’s interest rate marketization.In order to explore the impact of the national debt policy on the economy development of China,this article has carried out a more comprehensive and deep analysis of the economic growth effect,income distribution effect and inflation effect of China’s national debt since the resumption of national debt issuance in 1981,from a theoretical and empirical point of view.The main content of this article is divided into six parts:The first part is introduction.First of all,the background and research significance of this article are explained.Secondly,it defines the basic concept of national debt and the research scope of this article.Thirdly,the research ideas and methods of this article are introduced.Finally,comprehensively the full text,the innovations and shortcomings of this article are put forward.The second part,the function of the national debt and the economic effect of the national debt:a comparative analysis from historical perspectives.This part systematically sorts out and summarizes the theoretical literature and empirical literature on the economic effect of national debt from a historical perspective.First of all,the literature on the economic effects of government debt is sorted out from the perspective of economic history.Secondly,it makes a theoretical review of China’s national debt practice and related thoughts.Finally,the research on the economic effects of national debt is reviewed.The third part is the economic growth effect of China’s national debt.Firstly,it describes the typical facts of the economic growth effect of national debt of China,including the dynamic relationship between national debt and economic growth,and a sub-examination of national debt and economic growth.Secondly,it discusses the theoretical framework and mechanism of national debt promoting economic growth,including the theoretical framework of national debt promoting economic growth,and the channels through which national debt promotes economic growth.Thirdly,through empirical analysis,to identify the economic growth effect of national debt,including SVAR model construction,model estimation and impulse response.Finally,a chapter summary is made,including empirical conclusions and policy recommendations.The fourth part is the income distribution effect of China’s national debt.Firstly,it describes the typical facts of the income distribution effect of national debt of China,including the dynamic relationship between residents’ income distribution and national debt,the current status of urban residents’ income structure,and the current status of rural residents’ income structure.Secondly,it discusses the theoretical mechanism of national debt of China affecting the income distribution of residents,including the income distribution pattern of Chinese residents,the difference in the adjustment effect of residents’income distribution between national debt and taxation,and the adjustment path of national debt on income distribution.Thirdly,through empirical analysis,to identify the income distribution effect of national debt,including model construction and identification methods,empirical analysis of the effect of national debt on the overall income distribution effect,and empirical analysis of the effect of national debt on urban and rural income distribution.Finally,a chapter summary is made,including empirical conclusions and policy recommendations.The fifth part is the inflation effect of national debt.First of all,it discusses the transmission mechanism of the inflation effect of national debt of China,including the mechanism of national debt affecting inflation through money supply and total output.Secondly,it focuses on the impact on inflation when the government uses fiscal surplus to repay the national debt,including the identification of the S-type surplus process based on the repayment of national debt of China,and then by using the neo-Keynesian dynamic stochastic general equilibrium model to simulate and distinguish the inflation effects of fiscal and monetary policy rules and exogenous fiscal and monetary policy shocks.Thirdly,it discusses the feasibility of fiscal deficit monetization.Finally,a chapter summary is made,including empirical conclusions and policy recommendations.The sixth part is suggestions for improving national debt policy of China.After empirical research,this article finds that for the economic growth effect of the national debt,it has both crowding-in effect and crowding-out effect on residents’investment.Secondly,the national debt policy has both crowding-in effect and crowding-out effect on household consumption.Thirdly,the national debt policy has both positive promoting effect and negative restricting effect on macroeconomic growth.Finally,the results of the variance decomposition show that the national debt policy has a significant impact on household consumption,and has a relatively obvious effect on economic growth,and has a relatively weak impact on the fluctuation of household investment.For the income distribution effect of national debt,firstly,the increase in the flow and stock sacles of national debt of China has expanded the overall income distribution gap of residents.The larger the flow and stock scales of national debt,make the greater the actual total Gini coefficient and the greater the income distribution gap of all residents.Secondly,the increase in the flow and stock scales of national debt has widened the income distribution gap between urban and rural residents.The larger the flow and stock scales of national debt,make the greater the actual urban and rural Gini coefficient and the greater the income distribution gap between urban and rural residents.For the inflation effect of national debt,comparing different policy rules,as a response to the decline in output and inflation,the fiscal surplus dropped significantly during the impact period before recovery.Output and inflation responses have roughly similar patterns,but the response scale is roughly about half,and to certain extent dynamics are more continuous.The policy rules are smooth and therefore help to ease the shock of inflation and output response.In the process of promoting the government’s optimization and transformation of national debt policy of China in the future,this article puts forward the following policy recommendations.Firstly,it should keep using the national debt policy rationally,and appropriately expand the scale of fiscal deficits and national debt under the premise of controlling risks.However,the scale of national debt should be controlled within a range that does not cause huge fluctuations in the income distribution gap to avoid the rapid expansion of national debt widening income distribution gap.Secondly,the government should strengthen the management of national debt investment,and standardize the usage of national debt.It should optimize the investment structure of national debt and improve the usage efficiency of national debt funds,and guide the national debt policy to shift from crowding-out effect to crowding-in effect.Moreover,the government should increase investment in rural areas and promote the development of rural areas,thereby reducing the income gap between urban and rural residents.Finally,it should intensify the publicity of national debt,and improve the issuance method of national debt,and increase the variety of national debt.Furthermore,it also should accelerate the construction of national debt circulation market,and encourage residents,especially rural residents,to invest in national debt.In the meantime,improving the personal tax system and increasing the personal tax system’s progressiveness,to establish the borrowing and repayment mechanism that matches power and responsibilities of national debt owners.Therefore,to expand the scope of benefiaries of national debt,and finally achieving the goal of common prosperity.