Monetary policy&fiscal policy
In 2007, U.S. sub-prime mortgage crisis broke out, it quickly evolved into a global financial crisis, and the world economy has been hit hard. Countries all over the world have to take kinds of monetary policies and fiscal policies to stimulate domestic investment and consumption, hoping that can eliminate the impact of financial crisis and maintain economic growth. As the emerging economic entity in recent years, China has maintained a good momentum of economic growth. To offset the impact of financial crisis on China and continue to maintain steady and rapid economic growth, the Chinese government has adopted a package of loose monetary policies and active fiscal policies, which can stimulate investment and consumption in a certain extent, ensuring continued growth of Chinese economy. But these policies also make domestic bank’s deposit rate and loan rate decline steadily, hot money flood into the market, especially in the real estate market, leading to unprecedented high price of house, inflation pressures continue to increase. It can infer that the results of loose monetary policies and active fiscal policies have both positive and negative sides. This paper takes China as an example, analyzing and evaluating the policies response to the economic crisis and results of the implementation of various fiscal and monetary policies after the financial crisis.
Overview of fiscal policy and monetary policy ⅰActive fiscal policy
Active fiscal policy generally means to take financial deficit or government investment to improve the lack of effective demand. According to Keynes’ theory(1936), in a recession environment, the effectiveness of monetary policy is severely constrained, it should focus on the implementation of the proactive fiscal policy to respond to the negative impact of economic recession. For the sake of responding to the financial crisis, China has used a variety of fiscal tools, such as budget, taxes, and interest subsidies. Expand of