Discussion of fiscal policy and macroeconomic stability based on on the situation of Perspectives change

Abstract：Macro-economic regulation and control system is relatively large and complex， which consists of financial， credit and price statistics and other sectors of the economy， where the financial sector is an important integrated system， financial is a rapid response， the effect is obvious means， but also has the characteristics of sensitive information in the entire national economy a major role in the macro-control system.When the government to implement macro-control， often using fiscal policy， its effectiveness is closely related to macroeconomic stability， especially under the circumstances change more obvious sight.This article will discuss the situation on the next shift fiscal policy and macroeconomic stability under the horizon， the first clear meaning of the type of fiscal policy and fiscal policy analysis of macroeconomic situation and transformation features， and finally the effects of fiscal policy on macroeconomic stability and Mechanism analysis on it， in order to promote China's sustainable development of national economy healthy.

Key words：Circumstances change sight； Fiscal policy； Macroeconomic； Stability

Theoretical study of fiscal policy on macroeconomic stability has been the focus of debate and international academic hot spot， economists have different views and opinions. China's macro economy from the 1990s began to increasingly stable， an important means of macroeconomic control is fiscal policy， which is closely related to our macroeconomic stability， fiscal policy effectiveness is the need to study macroeconomic thought.

1.Fiscal Policy Analysis

（1） Fiscal Policy Implications

China's fiscal policy mainly refers to： for financial work and financial relations process adopted a series of guidelines， criteria， and the sum of government measures in accordance with objective economic laws. China's current implementation of a dual structure of financial institutions， mainly refers to the dual structure of public finances and the state capital of finance， fiscal policy is the main functions： resource allocation functions， income distribution functions and supervision and management functions， and so on [1]. Western economists have different understanding of the definition， they believe that fiscal policy is mainly refers to the use of government spending and output to achieve certain revenue goals， or the use of national government budgets adjusted the level of demand in order to promote full employment and inflation .

（2） Fiscal Policy Type

Fiscal policy based on the need to achieve the purpose and effect of economic activities， in general， divided into automatic stabilizers and discretionary fiscal policy two categories. Automatic fiscal stabilization policy can be based mainly refers to certain economic fluctuations in aggregate demand will change automatically eliminated， and thus play a role in economic policy stability， and its stabilizing effect is usually through tax and expenditure to achieve stabilization mechanism， which finances policy has the following features： 1， automatic stabilization tax that specific performance characteristics when there is a progressive income tax institutionally， such as personal income tax system， it has a certain threshold， using a progressive tax rate， the economy is in recession， downturn， personal income will be reduced， and therefore meet the conditions to reduce the number of taxpayers， some people will fall from high tax to low tax rates. Comparison of economic prosperity， personal income， eligible taxpayers increases， the number of people using high-end tax rate also increases， increase tax income countries， so that we can better curb excessive expansion of aggregate demand， which also has corporate income tax function similar species [2]. 2， expenditure inherent stabilizer function， expenditure of the various transfer programs have some automatic stabilization， particularly in government transfer payments to resident individuals， for example， the cost of personal welfare and unemployment benefits. This fiscal policy in the recession period have increased the role of personal income and personal consumption can suppress excessive falls in demand， their personal transfer payments during the boom years will be reduced， but can prevent the economy from overheating. Discretionary fiscal policy is mainly refers to the government based on the economic situation for a certain period， in order to complete certain macroeconomic goals， take the appropriate fiscal policy， the government is using the financial resources of the national economy was a conscious intervention， based on the total amount of the role of economic regulation can is divided into expansion， contraction and neutral fiscal policy， an expansionary fiscal policy： this policy is also known as expansive fiscal policy， mainly refers to the reduction of revenues or increase fiscal spending policies to stimulate aggregate demand， the government this is often used to reduce the tax policy is eligible to increase spending to stimulate economic purposes. When the economic recession， the government will use to reduce tax rates， tax exemptions or tax rebates and other methods to reduce the size of the tax. The Government will increase the number of public spending such as public works spending， government purchases of goods and services and so on， with the multiplier effect to achieve the purpose of stimulating economic growth. 3， contractionary fiscal policy： the government to increase fiscal revenue allocation activities or reduce expenditure in order to achieve the purpose of social inhibition of total demand， often take measures to suppress overheating of the economy and when overall demand expansion. When the economy expands， the government will reduce aggregate demand by raising the tax rate， set up a new tax or reduce tax rebates， and the reduction of public expenditure， by means of the multiplier effect of inhibiting economic overheating. 3， a neutral fiscal policy： to maintain its main revenue and expenditure broadly balanced， maintaining aggregate demand and aggregate supply balance on this basis， the fiscal policy has to keep the total social supply and demand simultaneous increase in functionality， the essence of the policy is not to interfere with the market mechanism role， not take the initiative to use financial means to influence the relationship between total supply and demand， so the total social supply and demand no preference regulation [3].

2.Circumstances Change Fiscal Policy Under The Horizon And Macroeconomic Analysis

（1） Data collection and use

Experimental studies collected here chosen in January 1992 --2005 June monthly data， which comes from the \"People's Bank of China Quarterly Statistical Bulletin\" and the database of relevant information. When analyzing macroeconomic variables， we need to inflation， industrial added value and consumption into account， the rate of inflation using the consumer price index （CPI） measure. Month price and the rate of change on the month shall be calculated collect price fixed base monthly time series data， and uses 2001 after MoM inflation and prior-year inflation rate， the consumer price index will be in June 1997 as the base period， after season to adjust the X-12 were so divided by the consumer price index， calculated the growth rate of industrial added value， the same calculation method can also be calculated by consumption growth and export growth. Expenditure and tax revenue of major fiscal policy variables， which is based on the fiscal budget year， the monthly payments because of financial arbitrary large， discretionary fiscal policy changes can not be a true reflection of it， so often used cumulative monthly expenditure growth monthly rate and cumulative growth rate of tax revenues. From the data collected can be analyzed： various macroeconomic variables and fiscal policy variables fluctuate very intense throughout the sample period， the distribution of a large health and normal gap， high peaks and serial correlation is obvious [4]. Analysis of these data can be summarized statistics summarize： In the entire sample period， macroeconomic and fiscal policy there are more significant structural changes or structural break， which also provides an effective model for further information.

（2） Model selection and estimation

When our macroeconomic and fiscal policy analysis， the variation using general linear model may lead to more obvious bias， which is China's macroeconomic and fiscal policy may have significant structural changes or structural breakpoint in the entire sample period related and the situation Markov transition vector autoregression model is to make up for these shortcomings， the situation changes and can be effectively combined with vector autoregression model system， better capture the economic variable nonlinear dynamic characteristics， and apply them to evaluate the macroeconomic stability policy， it is best to use this situation change vector autoregression model in the analysis of the macroeconomic and fiscal situation of transition characterized [5]. The core idea of this regression model are mainly： VAR model parameters and conditional heteroskedasticity is not linear， it will be different with the economic status change， showing a nonlinear feature of this model is the most commonly used two methods to estimate is： Maximum likelihood estimation method and Gibbs sampling， the former model parameter estimation less is more convenient， the latter is more convenient in terms of handling more complex estimates.

（3） Characteristics of the situation change

According to Markov transition situation VAR model estimation results can be analyzed and summarized the situation in China's macroeconomic performance and fiscal policy shift feature. Sight situation change when the real economy is in contraction state of the economy will continue to show significant prosperous state， to maintain tight state probability is 0.984， this state average duration is about 63 months， when the industrial added value， the average growth rate of consumption and exports were 0.01%， 0.53% and 0.32%； maintain the expanded state probability 0.978% and an average duration of 45 months， the industrial added value of the period， the average growth rate of consumption and exports are 1.6%， 0.88% and 1.81%. China's real economy in the first half of 1993， a brief expansion， and then enter a relatively long period austerity and continued until 2000 gradual recovery， and appear repeatedly in early 2001， and finally into a steady expansion in the second half of 2002 [5]. China's economic status and low inflation was significantly higher than the duration of high inflation， while maintaining low inflation probability is 0.906， the low inflation is the average duration of 10 months， the average inflation rate was 0.16%； when the probability is high inflation rate continues at 0.555， high inflation rate was 1.05% for 2 months. Prior to 1995， our economy is in transition alternating between high inflation and low inflation state， and each state duration is shorter than the overall inflation rate during this period is relatively high. After the process of overall economic status and low inflation [6]. Expenditure in the low-growth state， and continued high growth significantly higher than the state persistence， showing China's overall expenditure within the trend more obvious tightening fraction of the time （second half of 1993 - 1994 the first half of 1999 Nianxia half --2002 in the second half）， most of the time remaining on the economy as a whole showed a relative expansion trend. Fiscal Expenditure Policy of exhibited more significant discretionary nature， most of the time expansionary fiscal policy in line with the performance characteristics of the counter-cyclical Keynesian economic theories reflect.

3.Stabilizing Effect Of Fiscal Policy On Macroeconomic Analysis

（1） Using the model estimates

Characterized in that situation changing macroeconomic and fiscal policy， our performance was more obvious situations where the use of Markov transition vector autoregression model analysis of macroeconomic stabilizing effects of fiscal policy， the first is the use of models to estimate the results. Macroeconomic volatility of the real economy， including volatility and inflation volatility， where the use of industrial added value growth rate of consumption growth， export growth and the HP filter to eliminate the variables to measure the absolute value after trend analysis. Expenditure policy and tax policy efforts to use fiscal spending growth rate and cumulative growth rate of tax revenue accumulated absolute deviation fg ft and capture， analysis and estimates.

（2） Impulse Response Analysis

The results with the above model estimate， whereby the impulse response function can be estimated， and use it to further analyze the impact of fiscal policy on macroeconomic stability generated Markov transition vector autoregression model situation in fact is a nonlinear model， the traditional impulse response function does not apply， for some scholars put forward new impulse response function， which is capable of nonlinear dynamic model of a Gaussian impulse response investigation and analysis of information， can analyze the situation shift shocks caused. From the relevant estimates and a diagram showing the ability to analyze the changes in discretionary expenditure policy on macroeconomic variables fluctuations significantly different. Industrial growth because discretionary changes in the fiscal expenditure policy in the short term and the emergence of significant fluctuations， and in a month after its maximum impact， but industrial growth fluctuations in two months after a significant reverse reaction， which also shows that discretionary fiscal expenditure policy in the industrial growth and stability is very favorable， and the maximum stabilizing effect in four months. Then its stabilizing effect is gradually weakened， although weakened， but its sustainability is still high. Further discretionary fiscal policies are conducive to consumption growth and stable export growth， and in the short term to achieve the maximum， this fiscal policies are conducive to real economic stability. The macroeconomic impact by discretionary tax policy changes is different， this fiscal and tax policies in general， are not conducive to the stability of the real economy， but there are some fluctuations in fiscal policy to increase the industrial economy has brought a positive impact， and 1 maximum months later， but this short-term policy to promote steady growth of consumption and export growth， the steady influence lasted only a month， but a greater impact on exports， but also a long time， lasted four months. Discretionary tax policy to stabilize the price action is also very significant [7]. Macro economic variables for each level and volatility of discretionary fiscal policy a greater impact， and when the macroeconomic situation change when the decline， economic volatility state transition from low to high volatility state level and volatility of the economic variables related to fiscal policy exhibit decreased jumping， which is the largest decline in export growth and fluctuations in discretionary fiscal spending policy， consumption growth and inflation volatility is relatively small， and this consumption growth and inflation fluctuations relatively flat relevant.

4.The Role Of Fiscal Policy In Maintaining Macroeconomic Stability Principle

（1） Analysis of the relationship between the three major macroeconomic model

The formulation of macroeconomic stabilization policies often using three macroeconomic models： Income - expenditure model， IS-LM model and AS-AD model. Revenue expenditure is the most basic model of income determination model， has become a Keynesian cross or 45 ° chart， it can explain the IS curve， and this curve were liquidity preference theory being interpreted in conjunction with the IS curve LM curve can be drawn together IS-LM model， which explains the aggregate demand curve. Since the aggregate demand curve is part of the total supply and total demand models， economists often use the short-term impact of its policy to explain changes in income brought about by [8]. Use Income - expenditure model that purports to show fiscal policy is how it affects aggregate demand； using the IS-LM model of fiscal policy action to analyze and further explain the specific situation of fiscal policy， as well as how to be a real role to play； use AS-AD model is mainly based on the macroeconomic situation described select the appropriate type of fiscal policy. Below we will mainly analyze the first two macroeconomic models.

（2） Expenditure role model - revenue in fiscal policy

Income - Expenditure is the most simple macro an economic model， equilibrium analysis of national income often decide to use this model. When the economy is in equilibrium， often using the actual units， planned expenditures and planned income on the other， and they planned income equal to the planned outputs. This state can usethe 45 ° line representsthe model in detail as shown in Figure 1.

Figure 1 45 ° diagram

With the role of fiscal policy analysis diagram， it should be clearly recognized by two points： first， from the figure can be analyzed： economic deflation gap when. The Government will increase the total demand from the point of view to consider the issue， and immediately adopted an expansionary fiscal policy， but the model does not appear to expansionary fiscal deficit and make up the deficit out by himself [9]. Second， when the government is facing the twin problems of unemployment and inflation， this model can only solve one problem， another problem will increase and， for example， if the government is the main objective - control of inflation is good， then it will reduce the demand， demand reduction after it will further aggravate the unemployment situation.

（3） The role of fiscal policy in the IS-LM model

IS-LM model than income - expenses more complete model， not only from the combination of commodity market and money market equilibrium analysis of national income， the equilibrium interest rates also were studied in very realistic macroeconomic analysis， the estimation model diagram Figure 2 shows.

Mobile Figure 2 IS-LM Model Equilibrium and IS Curve

Mobile IS curve may be several factors： business confidence， so as to increase financial investment expenditure； tax fiscal policy adopted by the Government to promote consumer spending to increase the number； a significant increase in government expenditure， and so purchased， tax cuts and increased support are a policy of fiscal policy， which can be analyzed from these facts summed up： when the fiscal policy changes， there will be changes in the iS curve， and fiscal policy to promote iS curve shifts to the research needs the analysis method above Fig. 1. Fiscal policy would increase the aggregate demand curve shifts to the right， reduce the total demand will move it to the left.

5. Conclusion

Between our fiscal policy and macroeconomic stability are closely related， in the transition state of the situation is far more dramatic， this article focuses on the analysis of the situation based on the transformation of the field of view of fiscal policy and macro-economic stability， fiscal first clear policy implications and species， then analysis of the macroeconomic situation and fiscal policy shift feature， clear the impact of fiscal policy on macroeconomic stability， fiscal policy results of the mechanism of the effect of macroeconomic stability as a guide to promote the healthy and stable development of the national economy.