What Are the Different Methods of Fiscal Policy Analysis?

Fiscal policy system refers to the orderly assembly of the elements and links of fiscal policy, that is, the interrelationship and interaction of several parts according to a certain structure and a whole with a specific function.

Fiscal policy system

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Fiscal policy system refers to the orderly assembly of the elements and links of fiscal policy, that is, the interrelationship and interaction of several parts with a certain structure and a whole with a specific function.

Due to the different nature, functions, and types of fiscal policies, the fiscal policy system itself forms a large system, and in this large system there are fiscal policy sub-systems and fiscal policy subsystems: and the systems are interconnected, interdependent, Mutual restraint. From a vertical perspective, central and local fiscal policies are a subordinate relationship; from a horizontal perspective, fiscal policies at all levels are in a coordinated and cooperative relationship. Therefore, the relations between fiscal policy systems are connected up and down and coordinated left and right, that is, vertical consistency and horizontal coordination.

Chinese name

Fiscal policy system

Fiscal policy elements

Correlation

Fiscal policy function

Holistic

Fiscal policy operation

Orderly

1. Relevance of elements of fiscal policy. Fiscal policy is an essential element of a fiscal policy system. Within the fiscal policy system, there are a large number and types of fiscal policies. As an element of fiscal policy, it exists and exerts its effects. It restricts and restrains each other vertically and horizontally, and it shows the direct connection between fiscal policies. Or indirectly. The former refers to the links between policies with the same goals and the same problems; the latter refers to the links between policies with different goals and the problems belong to different fields or aspects. ^[1]

1. New functions. The synergistic effects of the various elements of the fiscal policy system make it qualitatively new in nature and its constituent parts. ^[1]

The classification of fiscal policy systems is to facilitate the formulation, research, analysis, and implementation of fiscal policies, and to divide the composition of fiscal policy systems according to different principles and standards. There are seven main classification methods. ^[2]

(1) According to the period during which fiscal policy comes into play, it can be divided into two types: medium and long-term fiscal policy and regular fiscal policy.

1. Medium and long-term fiscal policy. Basic policies and codes of conduct formulated to guide medium-term (about 5 years) and long-term (about 10 years) fiscal distribution activities. It mainly proposes strategic and overall guidelines for some major policies in fiscal distribution based on the development tasks set out in the socio-economic development strategy, the five-year plan for national economic and social development, and the ten-year plan. The main contents of medium- and long-term fiscal policies include: the growth target of fiscal revenue and expenditure levels and the basic ways to achieve this goal; the development direction of fiscal revenue and expenditure structure, the adjustment of the accumulation and consumption ratio, the adjustment of the fiscal distribution pattern, and changes in the fiscal management system The trend and so on.

Because the medium- and long-term fiscal policy involves a long time and many uncertain factors during the planning period, it can only be a rough design for the basic direction and major issues of fiscal development. However, it is of great significance to ensure the continuity and stability of fiscal and economic development, and it is also the basis for formulating regular fiscal policies.

2. Recurrent fiscal policy. The implementation of medium- and long-term fiscal policy goals and fiscal policies that are focused on regular and short-term fiscal policies are clear, flexible, and operational. According to the actual situation of each year, it embodies the strategic principles stipulated by the medium- and long-term fiscal policies, and continuously adjusts and supplements the actual operating conditions of the national economy. Its main contents include: changes in the annual budget revenue and expenditure scale structure, investment scale and direction, changes in tax rates, tax burdens, tax reductions or preferences, adjustments to the base for corporate profits and local budget base adjustments, adjustments to the scope of subsidies and projects, Budget balance or control of deficit size. The regular fiscal policy is more realistic and more conducive to the implementation of the policy goals proposed by the medium- and long-term fiscal policy. It is an indispensable policy tool to achieve flexible national economic regulation.

Classified by the period in which fiscal policy is in effect, it is generally applicable when advocating the formulation and analysis of fiscal policies in different periods.

(2) Divided according to the content of activities regulated by fiscal policy, mainly including three categories.

1. Fiscal revenue policy. Define the total level and structure of fiscal revenue, the collection target and scope, and the methods and methods of revenue.

2. Fiscal expenditure policy. Define the total level of fiscal expenditures, expenditure structure and expenditure methods.

3 Fiscal control policies. According to the economic and social development requirements of a certain period of time, the relationship between the distribution of financial resources between the central and local governments, the distribution of income between the state and enterprises, the relationship between the national budget and extra-budgetary revenue and expenditure, finance, credit, materials, and foreign exchange Balance relationship for macro adjustment and control.

Classified by the content of activities regulated by fiscal policy, it is generally applicable to the formulation and analysis of overall fiscal policy.

(3) According to the composition of fiscal policy, it mainly includes seven categories.

Tax policy, national debt policy, investment policy, subsidy policy, expenditure policy, national budget policy, and state-owned enterprise income distribution policy.

The classification according to the composition of fiscal policy is generally applicable to the use of when advocating the formulation and analysis of a particular financial policy or specific financial policies.

(4) According to the role and scope of fiscal policy, it can be divided into two categories: macro fiscal policy and micro fiscal policy.

1. Macro fiscal policy is implemented in the entire national economy and it is a major fiscal policy that has extensive and far-reaching effects on national economic activities. It can have a significant impact on the total amount of national economic activity, especially aggregate supply and demand.

2. Micro-financial policies refer to fiscal policies that are implemented in local areas and units and do not have a significant impact on the overall national economic activity.

Classified by the role and scope of fiscal policy, it is generally applicable when advocating the formulation and analysis of fiscal policies in different scopes. However, the expression of micro-fiscal policy in this classification method is not scientific enough or specific. Because fiscal policy is not only an important part of national economic policy, but also one of the important contents of public policy, and public policy is to solve public problems. It is universal. The problem to be solved by fiscal policy is a public problem. Therefore, it should not be targeted at only one unit, which is contrary to the principle of universality.

(5) According to the functional effects of fiscal policies, they can be divided into three categories: aggregate adjustment policies, structural adjustment policies, and economic interest adjustment policies.

1. Aggregate adjustment policy refers to the basic principles and methods for adjusting the relationship between total fiscal revenue and expenditure stipulated by the state in order to adjust the balance between total social supply and total demand. It constitutes an important part of fiscal policy.

2. Structural adjustment policies are the basic principles and guidelines for adjusting the structure of fiscal revenue and expenditure in order to adjust the balance between the social supply structure and the demand structure.

3 The economic interest adjustment policy is the basic principle and guideline for the adjustment of income and expenditure changes stipulated by the state in order to adjust the socio-economic interest relationship. It mainly regulates the income gap of members of society and the income of various economic units.

The classification according to the functional effects of fiscal policies is actually a reflection of the state's functions as an economic regulator, economic builder and social manager. This classification method is generally applicable when analyzing the role of fiscal policy on economic aggregates, economic structure, and economic benefits.

(6) Divided according to the way in which fiscal policy functions, it can be divided into two types: fiscal policy that functions automatically and fiscal policy that works artificially.

1. Fiscal policies that function automatically are also called intrinsic stabilizers. Non-selective fiscal policies refer to fiscal policies that can automatically and quickly play a regulatory role in times of economic fluctuations. They are a powerful factor for stabilizing economic activities and reducing economic cycle fluctuations. Fiscal policies that work automatically include progressive corporate and personal income taxes, as well as unemployment benefits, other benefits transfer payments, and government budget spending programs, etc.

2. Man-made fiscal policy, also known as discretionary fiscal policy, discretionary fiscal policy, or selective fiscal policy, is a fiscal measure taken in accordance with the need to stabilize economic activities and mitigate fluctuations in the economic cycle. It mainly includes plans to change public works and other expenditures, which actually changes the scale of government budget expenditures; to change the expenditure plan of transfer payments, that is, to increase or decrease the amount of transfer payments by modifying the conditions of transfer payments; Changing the tax rate means increasing or decreasing the tax rate. It also includes changes to depreciation policies.

The classification according to the way in which fiscal policy functions is actually a part of the aggregate adjustment policy. It is a classification analysis method of fiscal policy in western economic theory. It is generally applicable to the analysis and research of fiscal policies that suppress fluctuations in economic cycles , It has certain reference significance.

(7) According to the impact of fiscal policy on aggregate demand, it can be divided into two categories: austerity fiscal policy and expansion fiscal policy.

1. Tight fiscal policy refers to fiscal policy that can suppress aggregate demand. If the economy is excessively prosperous and the expansion of effective demand has caused inflation, fiscal policies that reduce government demand to curb excessive aggregate demand should be adopted. Mainly include reducing government spending, reducing transfer payments, and increasing taxes. Increasing personal income tax can reduce consumer demand; increasing corporate income tax can reduce profits, lower investment willingness, and reduce investment demand; reducing government spending and reducing transfer payments can cause total demand to decrease. Tight fiscal policy is conducive to achieving the goal of stabilizing prices.

2. Expansionary fiscal policy, also known as expansionary fiscal policy, refers to fiscal policy that stimulates the increase in aggregate demand. If the economy is depressed, there is insufficient effective demand, excess production equipment and increased unemployment, an expansion policy that increases government demand should be adopted. It mainly includes increasing government spending, increasing transfer payments, and reducing taxes. Increasing government spending and increasing transfer payments will increase effective demand; reducing personal income tax will increase consumer demand, reducing corporate income tax will increase profits, stimulate investment, and increase investment demand. Increasing effective demand can multiply the level of national income through the multiplier effect, which can increase output and employment levels.

The classification according to the impact of fiscal policy on aggregate demand is generally applicable to the analysis and research of fiscal policies that eliminate economic fluctuations and promote the balance of economic aggregates. This classification analysis method is a more common method in the Western economics community, and belongs to the content of aggregate control policies.