Research On China’s Macroeconomic Issues Based On Projection Methods In The Context Of Supply-Side Structural Reform

After 2010,with the gradual disappearance of the demographic dividend,the gradual increase in the prices of factors of production,the weakening of export demands in the post-financial crisis period,and the growing contradictions between the domestic product supplies and the public consumption demands,the economic growth rate of China continued to decline.At the same time,China’s debt scale has continued to expand,and the leverage ratio of the real economy has rapidly risen to a high level.The emergence of financial risks has attracted widespread attention from the national regulatory authorities and the international community."Deleveraging" and "stabilizing growth" have simultaneously become top priorities for policymakers.At the end of 2015,the Chinese government changed the previous demand management policy and began to implement supply-side structural reform,and formed a specific economic work deployment of "cutting overcapacity,destocking,deleveraging,lowering costs and strengthening areas of weakness".Among them,"deleveraging" is an important part of financial and economic works,and facing the declining economic growth and the possible further tightening caused by the credit crunch,promoting reforms to accelerate the optimization of resource allocation and tax cuts to release the vitality of economic entities are the prescriptions prescribed by the Chinese government for "stabilizing growth ".These have triggered our thinking on the relationship between corresponding policy measures and economic growth.What is the mechanism for the deleveraging of the credit market to affect the real economy? What factors are related to the degree of economic impact of deleveraging? Can increased reform intensity stabilize economic growth? What are the differences in the impact of different tax rate adjustments on the macro economy? Exploring these issues has certain theoretical and practical significance for the rational formulations and implementations of related policies in China.Based on the above research objectives,this dissertation conducts a systematic analysis by constructing dynamic stochastic general equilibrium models(DSGE)on the basis of reviewing the existing literature.The empirical research of this dissertation consists of three parts.In the first part,the dissertation introduces the financial mechanisms including the occasionally binding collateral constraint and the leverage shock into a DSGE model,and then analyzes the transmission mechanism of the deleveraging shock to the real economy and examines the nonlinear relationship between the impact of the deleveraging shock and the debt scale of the economy.In addition,by distinguishing the "unanticipated shock" and the "anticipated shock",this part explores the effects of policy communication.The second part and the third part evaluate policies related to “stabilizing growth” from the perspectives of increasing reform intensity and adjusting tax policy,respectively.In the second part,the dissertation reviews the history of China’s economic system reforms,puts forward the view that effective institutional changes occur intermittently and randomly,and introduces reform factors and their characteristic of random occurrence into a DSGE model.The concept of "intensity of reforms" is established in our model similar to the price stickiness index proposed by Calvo(1983),and then the relationship between changes in reform intensity and economic growth is discussed.In the third part,through introducing an occasionally binding minimum wage constraint and the tax factors into a DSGE model,the dissertation comparatively analyzes the macroeconomic and social welfare effects of supply-side tax cut and demand-side tax cut,and discusses the economic impact and management strategy of the minimum wage system under the environment of reducing the burden on enterprises.Through empirical analysis,this dissertation draws the following main conclusions:(1)The deleveraging shock generally makes companies face more tighten credit constraint,which in turn causes economic contraction through the debt-deflation mechanism.In the downturn of the economy,the deleveraging shock’s negative effects will be magnified.In addition,the economic impact of the deleveraging shock is state-dependent on the scale of debt.For deleveraging shocks of the same magnitude,the larger the total debt of the economy,the greater the decline in output.Therefore,a large economic contraction is not necessarily caused by a large shock,but also depends on the timing of the shock and the debt status of the economy.(2)The advance communication of the deleveraging policy will make the economy begin to contract before the shock actually occurs,and will increase the magnitude of the economic downturn during the shock.(3)In the long run,an enhancement in the average reform intensity will increase the growth rate of the economy on the balanced growth path,thereby providing sustainable and effective support for economic growth;however,in the short run,the increase in average reform intensity will decrease the ergodic steady state of the detrended output,sometimes when the adverse effect of the reduction in the ergodic steady state of output on economic growth dominates,the economic growth rate will fall.Therefore,in the short term,there may be a certain trade-off between “accelerating reforms” and “stabilizing growth”.(4)In both terms of stimulating economic growth and improving social welfare,the supply-side tax cut is more effective than the demand-side tax cut.In addition,the increase in the minimum wage as a percentage of the average social wage will be detrimental to the overall economy and the social welfare,while supply-side tax cut policies can offset or partially offset these negative effects.The innovation of this dissertation is not only reflected in the research contents,but also in the applications of a kind of nonlinear DSGE model solving methods-projection methods.Most related studies in China use linear approximation methods or perturbation methods to solve the DSGE models,although convenient and fast,the limitations of these methods make them impossible to correctly solve models containing obvious nonlinear characteristics,such as the Markov state transition process,the occasionally binding collateral constraint,and the occasionally binding minimum wage constraint involved in the empirical parts of the dissertation.The dissertation analyzes the theoretical basis of the projection methods and uses the projection methods to explore the economic problems that the linear approximation methods and the perturbation methods cannot handle,thereby enriching the existing research on China’s financial and economic problems in the numerical calculation methods and the practical applications.