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The cause, features and effects of current policy mix of opposing fiscal and monetary policies

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  • Wei Liu

    (Beijing University)

Abstract

Currently, China's expansionary fiscal policy and tight monetary policy have formed an opposing policy mix. This is due to the imbalanced macro-economy, which suffers from the pressures of inflation and slow growth. In response to economic changes, China adjusted its monetary policy as the real economy has a weak demand for money. In its reactions to the financial crisis, China adopted a series of policies different from those implemented in European and American countries. For this mix of opposing fiscal and monetary policies to be effective, three conditions should be met: the adjustment of direction should fit the real imbalanced economic situation, financing and investing mechanisms should be market-based, interest rates and exchange rates should gradually become market-determined.

Suggested Citation

  • Wei Liu, 2014. "The cause, features and effects of current policy mix of opposing fiscal and monetary policies," China Finance and Economic Review, Springer, vol. 2(1), pages 1-12, December.
    • Handle: RePEc:spr:chfecr:v:2:y:2014:i:1:d:10.1186_2196-5633-2-1
    DOI: 10.1186/2196-5633-2-1
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