Identifying the Industrial Effect of China's Fiscal and Monetary Policies:Based on the Dual Perspective of Level Shock and Uncertainty Shock
This paper constructs a benchmark VAR model that includes fiscal and monetary policies variables and output and inflation variables of the three industries.It distinguishes the policy level shocks from the uncertainty shocks,and describes the mechanism of economic policy from a new perspective.The main conclusions of this paper are as follows:(1)Compared with SVAR models,the SV-SVAR model has significant advantages in modeling efficiency,system stability,and interpretation strength,which shows that it is more suitable for characterizing the transmission mechanism of economic policies.(2)The impact of uncertainty shocks sometimes even exceeds level shocks,but in most cases,it is manifested as the suppression of the output of the third industrial,while the regulation of the third industrial inflation needs to face a trade-off.(3)In terms of the industry's adjustment,tax cuts and fee reductions is an effective means to optimize the output of the three industries,while when it comes to price stability,robust interest rate regulation is more efficient.Under the impact of major random events such as COVID-19,the internal uncertainty of China's economy has been significantly enhanced.Exploring how economic policies,especially sudden policy uncertainties,affect the development of the three industries can provide important empirical reference for balancing stable economic development and industrial structure upgrading.
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