An Analysis Of The Aggregate Supply Effects Of China's Tax Policies During The 1978-2007 Period

Tax policy regarded as a fiscal policy is seen as a tool for aggregate demand management, which has been recognized since the birth of Keynesianism. Tax policies have impacts on aggregate demand which results in aggregate demand effects, so tax policies can adjust aggregate demand. In fact, at the beginning of China's reform period, China's economy is lack of production, development is the top priority, and during the period China has pursued the policies of "Tax-cutting and Profit-giving", which effectively promotes the development of production. Under the guidance of Marxist expanded reproduction theory, China's tax policies have played an important role in developing production in China's national economy since the beginning of the reform period. Production is supply, tax policies can also have impacts on aggregate supply which results in aggregate supply effects. In fact, demand and supply is two sides of the same question, the two sides accompany with each other which can not be divided from one another. For example, it is obviously that tax cut policies for investment will naturally increase demand for investment, on the other hand it also can provide supply, and with the investment put in different fields, it can change the structure of supply simultaneously. Based on this, the central thesis of the research is to examine the tax policy's effects on production or supply, i.e. the tax policy's aggregate supply effects. First of all, the paper theoretically dates back to the tax policy's aggregate supply effects, and deeply analyzes the path selections and mechanism of the tax policy's effects on the aggregate supply, while exploring the aggregate supply effects of China's tax policies with the examples of China's partial tax-cut policies during the 1978-2007 period. The paper concretely analyzes the aggregate supply effects of China's tax policies during the period in perspective of the relationship among the macro tax burden, the output and price. On the basis of these, the paper analyzes the aggregate supply effects of tax policies on the framework of AD-AS model, and sets up VAR model from AD-AS model to empirically study the tax policy's aggregate supply effects, with the results of empirical analysis and the practices of China's tax policies and China's macroeconomic operations, finally it offers corresponding policy suggestions.