中国经济学人杂志在线阅读
Structural Fiscal Regulation andChoice of Instruments in the NewNormal'
Bian Zhicun (卞志村)and Yang Yuanyuan(杨源源)
'Schopl of Finance, Nanjing Universily of Finance & Economics, Nanjing, China
'Schoo! of Economics, NanJing Universtry, Nanjing, China
---文章选自中国经济学人杂志
Ahstract: Based on the overall consideration of individual behaviors of Ricardian and non-Ricardian households, this paper develops a New Keynesian dynamic stochastic general equilibrium (DSGE) model to form a relatively systematic research framework for analyzing the economic effects of structural fiscal instruments. Our study findsthat great differences exist in the macroeconomic effects of different fiscal instruments, suggesting that the government should prudently select these fiscal instruments in fiscal macro-control. The simulating results of fiscal shocks show that the effect of tax cut is superior to the effect of increased spending. In the context of slowing economic growth and less potent stimulation policy, the government should transform its previous regulatory approach of fiscal policy and shift from hefty spending stimulus policy to structural tax cuts. This paper believes that China should step up the implementation of public-private parinership, increase its spending on social security, healthcare, pension and public services and facilitate the transition toward a service-based government; and that tax policy should focus on structural tax cuts on consumption to promote the transition of demand structure toward consumption-driven.
Keywords: new normal, structural regulation, New Keynesian model, fiscal instruments
JEL Classification: G38
1. Introduction
Amid China's economic ups and downs since reform and opening up in 1978, China's fiscal policy has shown a great deal of flexibility and targeted response. However, some fiscal policies deviated from their intended effects, making fiscal regulation less potent in recent years (Li Liang and Liu Yuanchun, 2014). In response to the global financial crisis, China introduced a 4 trillion yuan stimulus package at the end of 2008, followed by a proactive fiscal policy for seven years thereafter. Despite these efforts, China's economy is slowing down and fraught with price volatility, overcapacity and debt risks and has to simultaneously deal with slowing growth, making difficuit structural adjustments, and absorbing the shocks of the previous economic stimulus. In this context, the Chinese government has changed its previous economic strategy and policy approach, putting forward the concept of the "new normal" and giving more prominence to the quality of economic growth. Given China's macroeconomic situation, academia and policymakers should rethink the previous economic stimulus policy and systematically review the effect of China's fiscal policy.
The Central Economic Work Conference held on December 21, 2015 stressed the importance of “understanding the new normal, adapting to the new normal and leading the new normal”, giving equal importance to expanding aggregate demand and promoting supply-side structural reforms in formulating macroeconomic policy, and continuing to pursue a proactive fiscal policy and prudent monetary policy. The implication is that fiscal policy will continue to play an important role. On October 29, 2015, the Fifth Plenary Session of the 18" CPC Central Committee deliberated and adopted Suggestions of the CPC Central Committee on the Formulation of the 13th Five-Year Plan on National Economic and Social Development, calling for the innovation and improvement of macroeconomic regulation: China must improve its macroeconomic regulation, take timely and accurate measures of regulation, and attach more importance to expanding employment, stabilizing price, adjusting structure, improving efficiency, preventing risks and protecting the environment. As can be seen from its recent maneuvers, China's central bank is phasing out all-around economic stimulus and pursuing more specialized and targeted monetary regulation. In the new normal, China's fiscal regulation should be more innovative and precise to facilitate its economic transition and comprehensive reforms as well.
According to international experience, tax cut is an alternative to increasing fiscal spending when consumption and investment demand needs to be stimulated to shore up the economic growth. As far as China is concerned, these questions are particularly important: which type of proactive fiscal policy is more effective? In the context of sluggish investment and export, how should fiscal regulation effectively prevent risks and boost consumption? As shown by China's macroeconomic situation, overall policy regulation cannot address the above questions. What is necessary is to discuss and compare the macroeconomic effects of different kinds of structural expenditure and tax instruments. Since existing domestic literature on these questions is not sufficient, this paper will offer a systematic analysis of the different fiscal instruments based on the New Keynesian DSGE model, reveal the effect of structural fiscal instruments on major macroeconomic variables and transmission pathways, and propose recommendations on fiscal policy transition in the new normal.
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