Analysis Of Policy Co-movement Effect With ZLB And FTPL

Under the global lower-interest-rate environment,the great pressure of domestic interest rate provides practical significance for the research and analysis of zerointerest-rate policy.Functional finance is also an important topic of domestic research.This paper uses the DSGE model to simulate the domestic economic environment in which the two policies,zero-interest-rate policy and functional finance,and gets the result of policy simulation analysis and provides suggestions for the future policy development of China.For zero-interest-rate policy,this paper analyzes the impact and background of the zero-interest rate implemented by the Federal Reserve.The zero-interest rate provides slack environmental basis,and it has no direct effect to the post-crisis economy.Zero Lower Bound constraint(ZLB)can be a perfect representation in the model.For functional finance,this paper compares the fiscal system of Richard regime classification with the FTPL system.Referring to domestic scholars’ research,this paper constructs policy co-movement and control variables to simulate the change of fiscal policy effect.The DSGE model selects quarter data from 2007Q1 to 2020Q1:fiscal budget expenditure,tax,real GDP,M2.After Bayesian estimation of the model parameter,the paper gets the following conclusion from impulse response analysis and analogue simulation.First,the promoting effect on domestic interest rates is significant.Zerointerest rate policy can smooth macroeconomic fluctuations in economic crisis,and cause severe changes in tightening environment.Second,the domestic economy tends to the FTPL system,which means the fiscal policy will not be fully adjusted due to the fluctuation of fiscal variables,and whether the monetary policy is independent depends on the tendency of fiscal policy.Third,two policies co-movement will stabilize the economic fluctuations under the slack economy,but they will also slow down the development under the prosperity.