Research On The Relationship Between Fiscal Deficit And Economic Growth

Fiscal deficit policy is widely used in the countries with different system and economic development level.China also pays great attention to the role that fiscal deficit policy plays in the economic development.The fiscal deficit policy plays a more and more important role in the government’s decision.With the change of political and economic background,fiscal policy also has different effects.In foreign countries,the “new Keynes ”has been questioned in the period of the United States economic stagnation which has been highly praised in economic crisis.The European debt crisis brought finance risk to our notice.In our country,the economic system has experienced the transition from planned economy to market economy.When the economic demand was insufficient in the mid twentieth century,the Chinese government officially put forward the "active fiscal policy",which is characterized by the large-scale issue of government bonds " and the scale of fiscal deficit has expanded ever since.Fiscal deficit spending affects the economy mainly through two ways.One is the size of the budget deficit.It’s not conducive to the realization of the function of government finance in small scale of fiscal deficit while too big scale will cause financial pressure to the government and increase financial risks.The government budget deficit scale should be matched with the economic development and scale of fiscal revenue and expenditure.Not only should we value the policy effectiveness,but also should pay attention to the financial risk;Second is the expenditure structure.Government spending affects the allocation of social resources and plays a guiding role in the development of social economy.Reasonable,focused expenditure structure is conducive to economic coordination and sustainable development.Only when the size of the budget deficit and the structure of the fiscal expenditure are reasonable,can we improve the efficiency of fiscal policy,and maximize the effects of fiscal policy.In our country,the government has played an important role in promoting the sustainable development of economy.As a tool of economic regulation and control of government,it is very significant to discuss its relationship with economic development.The scale of China’s fiscal deficit has expanded year by year,while China’s economic development has maintained a high growth rate.Is there a causal relationship between fiscal deficit and economic development? Whether the deficit will promote economic development or not? How the budget deficit can promote economic development?Whether the risk of China’s fiscal deficit can be controlled? These questions are worthy of discussion.This paper has five parts:The first part is an introduction which mainly introduces the background of this paper,the significance of the study and the review of domestic and abroad literature;The second part elaborates the related theories about the influence of the financial deficit.We separate the fiscal deficit from the Keynes IS-LM model and derive the multiplier of fiscal deficit on economic growth.The third part explains how to measure the scale of the local budget deficit in details.We measure and analyze the scale of the local fiscal deficit from 2009 to 2014 according to the local fiscal deficit definition which was proposed in the annual report of the work of the government by the State Council Premier Li Keqiang in the 2015;The fourth part is the empirical test.First,we use the provincial panel data to examine the impact of the fiscal deficit scale on the economic development;Secondly,we classify the data in accordance with the region,and analyze the effect of regional fiscal deficit on economic development.The results suggest that fiscal deficit has the function of promoting economic growth in China;The fifth part puts forward some policy suggestions based on the theoretical analysis and empirical test results.