Proactive Fiscal Policy and Fiscal-Monetary Mix under"Triple Pressure"in China's Economy
In recent years,China's economic development has encountered the"Triple Pressure"of demand contraction,supply shocks,and weakening expectations.By examining data from Q4 2019 to Q4 2022,this paper identifies significant disparities in China's real GDP,real consumption,and labor supply.The Chinese government's economic stabilization measures-such as tax cuts,fee reductions,and expanded fiscal spending—have heightened fiscal deficits,limited policy flexibility,and underscored the need for more efficient fiscal strategies and robust policy coordination.However,existing research on mitigating the"Triple Pressure"and enhancing proactive fiscal policy effectiveness remains largely qualitative.To address this gap,this study employs a New Keynesian Dynamic Stochastic General Equilibrium(NK-DSGE)model,utilizing conditional forecasting to capture the evolution of China's real GDP,real consumption,and labor supply during this period.By incorporating preference,labor supply,and technology shocks,the model simulates economic conditions under"Triple Pressure."The paper quantitatively assesses the multiplier effects and welfare implications of various fiscal policy tools and highlights the role of fiscal-monetary coordination in alleviating these pressures and expanding fiscal capacity.The analysis reveals three key insights:(1)Since household utility functions include livelihood expenditures,increasing these expenditures can yield significant consumption multipliers,enhancing social welfare and effectively bridging the consumption gap under"Triple Pressure."(2)Compared to a monetary-dominant policy mix(AM/PF)financed by taxation,a fiscal-dominant policy mix(PM/AF)supported by debt and inflation not only aids in escaping deflationary pressures but also amplifies growth stabilization from public investment shocks.(3)Within the PM/AF framework,tax and fee reductions bolster the seigniorage transmission mechanism,further magnifying the effects of proactive fiscal policies,thereby expanding fiscal policy space and improving their efficacy in addressing the"Triple Pressure."This research offers three primary contributions:First,it is among the first to theoretically model an economic environment of"Triple Pressure,"integrating structural shocks to represent these pressures and assess proactive fiscal policy impacts.Second,it explores fiscal-monetary coordination's role in optimizing fiscal policy effectiveness under"Triple Pressure,"providing theoretical insights into the debate on whether China should monetize fiscal deficits during extraordinary times.Finally,it assesses various fiscal policy tools from multiple perspectives,not only calculating fiscal multipliers but also measuring social welfare benefits,thereby presenting a comprehensive view for enhancing proactive fiscal policy quality and efficiency.The findings offer theoretical support for accelerating proactive fiscal policies during"Triple Pressure"and serve as a valuable reference for choosing fiscal-monetary strategies to optimize fiscal space and fully harness proactive fiscal policy effects.
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