Abstract: Since the mid-1990s, the fluctuation range of China’s economy has been significantly decreased and turned into a stabilizing tendency. At the same time, the budget constraint of the dual microeconomic agents constituted by state-owned enterprises and non-state-owned enterprises is hardening significantly, the investment behaviors tend to be more rational. For this reason, this paper constructs a new Keynesian sticky-price model including such factors as investment constraints of cash in advance and financial intermediary efficiency, the result of the numerical simulation study shows that the hardening of budget constraints forces enterprises to attach great importance to the internal cash accumulation, thus the impulse behavior of enterprise investment is suppressed effectively through the channel of real money balances. In addition, the hardening budget constraints can enhance financial intermediaries’ effect on reducing the economic fluctuations. Therefore, the hardening enterprise budget constraints and the improvement of financial intermediary efficiency can help to improve the stability of the macro-economy, and the significant changes of the hardening budget constraints can explain the stabilizing trend of China’s economic fluctuations.

Key words: budget constraints hardening; financial intermediaries; new Keynesian sticky-price model; stabilizing trend