Fiscal Deficit Extrusion Effect Empirical Research

Since the reform and opening-up, with the development of China's economy, our government's views on the fiscal deficit have gradually changed from passive to active. When the overall world economy declines due to US subprime mortgage crisis in 2009, governments of different countries tried to use fiscal deficit to promote their economic development, which resulted in a record high of the world fiscal deficit in 2009. Meanwhile, the Chinese government invested as much as 4 trillion RMB. However, how much the fiscal deficit has contributed to our country's economic development and whether there is any crowding-out effect on the economic development has always been the main concern and the issue always discussed in the academic field.This paper, based on the existing theoretical studies of the fiscal deficit and the real situation of China's fiscal deficit, gives a detailed analysis of the impacts of China's fiscal deficit on the economy in both macro and micro levels through both qualitative and quantitative analysis. It analyzes the impacts of fiscal deficit on aggregate demand from the macro perspective and also on interest rates, consumption and investment from the micro perspective. It also conducts an empirical analysis of related theories by using the latest data from the National Bureau of Statistics, draws scientific conclusions combining with data analysis and provides recommendations on corresponding policies, which gives some indications upon the direction of the fiscal policies in China.