Empirical Study On The Macroeconomic Effects Of Fiscal Policy In China

Fiscal policy is an important tool for economic regulation and control. Facing the complex economic situation,the goverment tend to take the corresponding fiscal policy to adjust the product market, money market and labor market,in order to promote economic stability and growth. The macro effect analysis of fiscal policy has always been the focus of academic research, and serveral macro economic schools has already put forward the relevant theory based on Keynes’s theory, but unfortunately, there are still some limitations and shortcomings of these theories and the guidanc on the economy is still not satisfactory.In 1990s, the government made the decision to establish a socialist market economic system. Over the next twenty years, the country has experienced several major economic fluctuations, but thanks to the fiscal authorities in China has implemented the differential fiscal policy according to different economic situation, our economic finally achieve the targets of economic growth. In the second half of 2008, in order to reduce the impact of the international fiscal crisis and smoothing the economic fluction, the Chinese government launched a four trillion economic stimulus plan. Now, since our country is in the deep water area of economic system reform, and so the fiscal authorities of our country have started a new round of proactive fiscal policy in order to deal with the situation that the economic growth slows down and the development pressure increases,. In view of the vital importance of fiscal policy to the government regulation and control economy, so we can see the particularly urgent of the objective description of the macro effects of fiscal policy. What is the macroeconomic effect of fiscal policy in China? How do fiscal policies play a role? What is the transmission mechanismof it? How to play a role in the economic operation of China? How to coordinate the fiscal and monetary policies to better implement the government’s macro regulation and control? The study of these problems is of great significance to China’s current economic situation.It should be pointed out that the empirical study of fiscal policy in China should be carried out under the framework of fiscal monetary exchange, which is not only the development trend of the general economic theory, but also the objective need of China’s economic reality. Theretically, several economic schools’s research process based on Kyne’s Theory show the trend from the separate fiscal policy to the fiscal nd monetary policy.But in the practical sense, the government ofen use the way of combination of fiscal and monetary to control the economy. For example, our fiscal policy previous adjustment will be accompanied by a shift in monetary policy, including the familiar "double tight" and "loose" policy and so on. If we split the connection betwen the fiscal and the monetary policy, the fiscal poliy will be a false judgmen. In view of this, to clarify the interaction mechanism of the fiscal and monetary policy, under the framework of the macroeconomic effects of fiscal policy is can be say the righ way of study the right choice of fiscal policy.Actual economic structure is vital for studying fiscal and monetary policy interaction. This paper constructs New Keynesian dynamic stochastic general equilibrium model to characterize such non Ricardian as liquidity constraint consumers, sticky prices and distorted tax. Now the DSGE model which is the main tool to analyze the macro economic field is the difference between the previous macro economic theory and the macro economic theory model. It can make the model more close to reality. Especially considering the interaction of fiscal and monetary policy, the DSGE model can accurately describe the behavior of the government, which is convenient for further analysis. In this paper, the DSGE model is used to construct the model, and the behavior of consumers, manufacturers and government. The model is used to estimate the model parameters for 2000:1-2014:IV date. The interaction of fiscal and monetary policies is analyzed by using the Dynare Matlab toolbox. On the setting up of the behavior of the fiscal authorities, to join the government spending rules and tax regulations, and to add a nonlinear looking monetary policy to the monetary authorities. Under this rule, the government spending and tax functions in the model. Proof automatic stabilizer forms of fiscal policy to or interfere with monetary policy and explore fiscal policy inertia, and rules of thumb consumers affect output and inflation changes of degree. At the same time, the effect of the tax wedge in the path of fiscal policy macro mechanism can be simulated.We finds that the fiscal rules have obvious restraint effect on the macro effects of fiscal policy in China through empirical analysis. It looks more efficient than the feedback of the government spending rules when compared with the automatic stabilizer based on tax policy and the combination of forward-looking monetary policy. The income tax is more restrictive than the individual income tax. When the monetary authorities have a higher independence, it may bring about the coordination of fiscal and monetary policy. These results prove that the study of this paper is effective. This paper puts forward policy recommendations to improve the macro effects of fiscal policy.