The Study On The Coordination Effect Of Fiscal And Monetary Policy In China

Fiscal and monetary policy are the important tools that nation use to illustrate macroeconomic regulation and control,to guarantee the sustained and rapid economic growth and the normal operation of the society.In the long-term process of policy regulation,the expectations of society to the national policy,economic fundamentals and specific policy measures form a feedback channel that influences each other,which comes to a ordered policy transmission mechanism that conducts policy to the real economy to generate the expected policy effects.At present,our country's economy enters the new normal,the supply-side structural reform is carried on within the whole society,during the period of transition,the economic structure needs to be adjusted,all kinds of economic issues need to be addressed,fiscal policy and monetary policy need to play a role of expectations,therefore how fiscal policy and monetary policy cooperate to achieve optimal economic and social effect is becoming an important problem which should be researched.So this background provides a great opportunity for the research of fiscal and monetary policy coordination,to reflect on past problems that exist in the regulation of fiscal and monetary policy in China,to absorb experience policy coordination,to straighten out the transmission mechanism of fiscal and monetary policy'cooperation,to make a clear correlation between fiscal and monetary policy,so that fiscal and monetary policies can better cooperate,the macroeconomic regulation and control can be more rational and thus can play a big role in keeping our country economy running smoothly.This article illustrates the policy targets,the micro foundation and the transmission mechanism of fiscal and monetary policy coordination,and uses the structure of vector autoregressive(SVAR)model to do the empirical analysis with the conclusion that fiscal and monetary policy have co-movements,but the effects to each other are statistically asymmetric.Then we introduce the new Keynesian dynamic stochastic general equilibrium(NK-DSGE)model with real rigidities and fiscal-monetary policy rules to match the theoretical model with data and empirical results.Finally,we get the following conclusions:(1)In our country,fiscal policy and monetary policy not only don't exist simple alternative or complementary relationship,but also don't exist a completely asymmetric relation,namely expansionary fiscal policy will lead to the passive expansion of monetary policy,and the expansion of monetary policy is accompanied by the expansion of fiscal expenditure.The reason of the former is due to the monetization of financial deficit as a result,while the reason of the latter is caused by irrational government spending tend to be more and more,especially consumer spending,it is not entirely on policy actions,and the empirical analysis' results are not significant,but it does exist.(2)Fiscal policy effect on economic growth is more significant than the effect of monetary policy,because on one side the goal of fiscal policy is more clear and more direct,on the other side in view of the independence of the fiscal policy it can give full play to stabilize the economy,so our country is given priority to fiscal policy,supplemented by flexible adjustment of monetary policy.Monetary policy tools have an important role to play in maintaining price stability and giving the inflation expectations of residents.(3)In view of the fact that the interest rate in China is not fully marketized,it is different from that of the United States and other western countries.China mainly uses quantitative monetary policy tools and have a significant effect,but the price-type monetary policy tools in macroeconomic regulation and control effect are superior than the quantitative monetary policy tools,and have shorter duration of the policy effect,thus there is less distortion effect on the economy,what's more,they can be less affected by fiscal policy,so can match the fiscal policies and independently realize own policy goals at one time.According to the conclusion,here are the corresponding policy suggestions:(1)To strengthen the independence of the central bank.Because our country's money supply is driven by multiple objectives,monetary policy is not independent,so the fluctuation of passive expansion on money supply caused by fiscal expansion will be passed to the entity economy,it causes the real economy's fluctuation,which is the adverse impact that monetization of fiscal deficit make on our country's economy.As a result,China's fiscal deficit scale control should be more cautious,more important thing is to strengthen the independence of the central bank,the aims of fiscal and monetary policy needs to have a clear maneuverability,the matching of the fiscal policy and monetary policy need to be moderate,thus to control the trend of the monetization of financial deficit.(2)To accelerate the establishment of interest rate corridor and realize interest rate liberalization.First,we should unify the benchmark interest rate and straighten out the mechanism of interest rate transmission.To concentrate on the Shanghai interbank offered rate(Shibor),the Treasury yield curve and loan interest rates(LPR)as a representative of the financial market benchmark interest rate system,and constantly improve the market interest rate pricing mechanism of self-discipline.Secondly,to form the elements of the interest rate corridor.The key links of the interest rate corridor are the optimal policy target interest rate,the lower floor of the corridor and the width of the corridor.From the perspective of the exploration process of China's central bank for the interest rate corridor,our country more likely take the SLF rates for ceiling,with the excess deposit reserve rate as the lower limit,and interbank lending rates or repo rate as the policy target rate.We can use the international experience to further establish a deposit facility instead of the excess reserve deposit rate to narrow the width of the corridor.Through these operations,the construction of China's price-type monetary policy tools is improved.(3)Policy coordination is dominated by fiscal policy and assisted by the flexible adjustment of monetary policy.China is currently focusing on the supply-side structural reform,which emphasizes supply management to cater to domestic demand,therefore macro-control policies need to guide the enterprises to improve efficiency and productivity,adjust the industrial structure,and keep continuous innovation,while fiscal policy plays an important role in this regard,so continuing the policy line that fiscal policy is primary and monetary policy coordinates is necessary.However,it is important to note that although the fiscal policy on economic stimulus is stronger,but it has significant crowding-out effect,and has an adverse effect on the long-term development of the economy,but given its correlation and consistency of policy objectives,the elastic type tie-in combination of fiscal and monetary policy will offset part of the policy effect,which requires the implementation of multiple policy objectives choice,and to control the tightness.