The positioning of macroeconomic policies and the choice of tools is a fine science. Many tools have very clear orientation in theory and macro. However, due to the variation of environment and the change of transmission mechanism, their micro effects are quite different. We should study in depth what parameters should be based on the core positioning of the overall policy, and what indicators and tools should be used to judge the enthusiasm or conservatism of the policy.
It is necessary to precisely define the core indicators of macroeconomic policies in terms of positive or contraction. An important issue is how to deal with such issues as macro and micro indicators, short-term and long-term indicators, differences at different levels and angles, and statistical data distortion. That is, in the case of uneven parameter data quality and significant differences in public opinions, which core indicators should we focus on when operating macroeconomic policies.
Taking the GDP growth rate as an example, the 5.2% growth rate is very good both from a historical perspective and from a cross-sectional perspective. Therefore, based on this parameter alone, our policy should not be over expanded. However, if we compare the 5.2% growth rate with the fixed base ratio, the two-year or multi-year compound average, and the month on month growth rate, we will find that there is a deviation of 1 to 2 percentage points between the GDP growth rate and the trend value. This is a relatively large gap, which indicates that further policy efforts may be needed. From the price data, CPI was - 0.3% and PPI was - 2.7% in December last year. Although the price level of the whole year was 0.2%, which was different from - 0.3% in December, the starting point of our work was not the past average, but the current actual situation. Among the numerous statistical data, price data has become the focus of aggregate supply and demand analysis in macro analysis because of the least incentive for fraud. Therefore, the CPI, PPI data and GDP deflator in December may indicate that the current contraction pressure is higher than expected. It can be seen that the macro policy should be more active, and the basic principles of macro regulation should not be ignored in a pile of complex data screening.
How can we judge that the implementation of policies has achieved positive micro effects? For example, can we define a proactive fiscal policy plus a prudent monetary policy as an overall proactive one? Is it a positive fiscal policy if there is a fiscal deficit or if the deficit ratio expands? Is it true that our money supply is pegged to the nominal GDP growth rate and is it stable? Through in-depth study, we can see that the fiscal deficit is affected by two factors: first, the growth of government revenue; Second, the growth of fiscal expenditure. The deficit is caused by spending more than income, which will bring obvious expansion effect. However, when the fiscal revenue shrinks significantly and becomes the core reason for the expansion of the fiscal deficit gap, the fiscal expenditure may decrease rather than increase compared with the previous period. The reduction of fiscal expenditure is a contraction effect rather than an expansion effect for market players. This means that the subsidies provided by the government are reduced, and the projects driven by government investment are also reduced. Market players do not care about the government's income, they are more concerned about their sense of gain. Therefore, although deficit finance may have positive effects, if the deficit mainly comes from the income side rather than the expenditure side, it will inevitably lead to differences between macro and micro, policy subjects and regulatory subjects, which will greatly reduce the positive effects, and may even produce indirect tightening effects. At the same time, China's fiscal expenditure should not only look at the general public budget expenditure, but also look at the government fund expenditure. In 2022, the fund expenditure will account for 30% of the general fiscal expenditure. In 2023, the general public budget expenditure will increase by 4.9%, but the fund expenditure will decrease by 13.3%. This is the core reason why the micro entities feel that the positive fiscal policy is not so positive. If we want to really improve the sense of gain of micro subjects in 2024, we cannot simply focus on the fiscal deficit rate and the size of the public budget. We must fully consider the state of the real estate market repair, and ensure that the broad fiscal expenditure covering public budget expenditure and fund expenditure maintains a positive growth. This is also the most direct measure of proactive fiscal policy.
For monetary policy, it is traditionally believed that a prudent monetary policy should ensure liquidity by matching the money supply and total social financing with the nominal economic growth rate. From the perspective of general economic principles, this is correct. However, in the event of deflation and price decline, simply targeting nominal GDP does not guarantee the overall stability and sufficiency of liquidity. Instead, it may produce a super contraction effect due to excessive attention to nominal parameters, especially the existing prices. Especially when asset and product prices decline at the same time, the contraction effect of monetary policy will be far greater than the general nominal adjustment speed, especially the contraction effect brought by the growth of money supply. China's nominal GDP growth rate will be 4.8% in 2022 and 4.6% in 2023. If the nominal GDP growth rate is pegged, it will inevitably lead to a sustained contraction of the growth rate of money supply or social financing. This also led to the growth rate of social financing stock and M2 growth rate at the end of 2023 shrinking by 2.1 percentage points and 0.1 percentage points respectively compared with that at the end of 2022.
Therefore, even though monetary and fiscal policies are appropriate in macroeconomic policy positioning, if there is no in-depth screening on the use of some tools, especially on the sense of acquisition of fiscal expenditure, monetary creation, and the real total amount of financing creation, the so-called positive policies will not only fail, but also produce contraction effects in the micro level, So that the behavior of market subjects is totally different from that of macro-control.
(The author is President of Shanghai University of Finance and Economics)
