The Combined and Coordinated Effect of Fiscal and Monetary Policies in Response to Significant Risk Shocks
The Chinese economy is transitioning from a stage of high-speed growth to a stage of high-quality develop-ment stage.Economic transformation refers to the evolution of economic development towards a higher level and a more com-plex structure,during which the impact of risk shocks on economy is also deepening.How to understand the formation mecha-nism of significant risk shocks correctly and effectively address them is of great significance for national economic security.Under the framework of a dynamic stochastic general equilibrium model,this paper analyzes the regulatory effects of re-ducing consumption tax,reducing capital income tax,lowering labor tax,increasing government expenditure,quantitative eas-ing monetary policy and price easing monetary policy,as well as combining fiscal and monetary policies,on significant risk shocks.The results show that:firstly,significant risk shocks cause economic downturn,exacerbate inflation,and increase govern-ment debt leverage.Secondly,compared to reducing consumption tax,capital income tax and labor income tax,increasing gov-ernment spending has the most effective effect on improving output.However,its negative impact is that it leads to higher infla-tion and government debt leverage.Thirdly,compared to active fiscal policies,easing monetary policies are more effective at controlling significant risk shocks,leading to less government debt risk and more serious inflation.Fourthly,active fiscal poli-cies have stronger effect on regulating significant risk shocks and lead to fewer social welfare losses when monetary policies re-spond to fiscal policies.The conclusion of this article has three implications.Firstly,from the perspective of fiscal revenue,the government should strengthen research on counter-cyclical regulation and optimize tax reduction and fee reduction policies.From the perspective of fiscal expenditure,the government should optimize the structure of fiscal expenditure,improve the effectiveness of policy funding.Secondly,the central bank determines the interest rate level by referring to market interest rates such as treasury bond yield curve,which helps to unblock the obstruction of monetary policies and improve the effectiveness of monetary policies.Thirdly,the ministry of finance should maintain sufficient communication with the central bank to improve the quality and effi-ciency of active fiscal policies.
Significant Risk ShocksFiscal PoliciesMonetary PoliciesDSGE Model
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