Research On The Effectiveness And Spillover Effect Of China's Monetary Policy In The Open Economy

Under the condition of open economy,the monetary policy of each economy no longer has complete independence.The effect of monetary policy on the internal economy has changed,while the spillover effect on the external economy is inevitable.In the process of continuous participation in economic globalization,China's economic status is becoming more and more important,and the degree of openness has also changed,so has the effect of China's monetary policy on the internal and external economy.The change of China's monetary policy's internal effect is reflected in the influence of opening to the outside world on foreign trade,two-way investment,international capital flow,etc.,which makes the mechanism of some transmission channels of monetary policy change.The change of China's monetary policy's external effect is reflected in that with the increase of China's foreign trade,investment and other economic activities,China's monetary policy began to have a certain spillover effect on the economies with close economic and trade exchanges or investment exchanges through some channels,which is becoming more and more obvious.In the process of deep integration into the global economic system,we must pay attention to the changes of internal and external effects of China's monetary policy.This paper reviews the research status of the effectiveness and spillover effect of monetary policy in the open economy,summarizes and analyzes the theoretical basis of the effectiveness and spillover effect of monetary policy in the open economy,and researches on the effectiveness and spillover effect of China's monetary policy.The main contents include:(1)Designing a kind of openness index which accords with the actual situation of China,and using the principal component analysis method to measure and analyze the openness of China.Establishing a model of the effectiveness of China's monetary policy in the open economy,and empirically testing the effectiveness of China's monetary policy in the open economy by using the structural vector autoregressive model(SVAR),as well as the impact of changes in openness on China's output,price,interest rate,exchange rate and other economic variables.(2)Establishing a model of the impact of trade openness and financial openness on the effectiveness of monetary policy,and using the modified output effect and price effect model to test the effectiveness of China's monetary policy under the open economy,as well as the impact of changes in trade openness and financial openness on the effectiveness of monetary policy.(3)Establishing a model for monetary policy spillover effects between China and the United States,between China and the Eurozone,and using the time-varying parameter vector autoregressive model(TVP-VAR)to empirically test monetary policy spillover effects between China and the United States,and between China and the Eurozone with characteristics over time.Establishing a model of the spillover effect of China's monetary policy on BRICs countries,using the panel vector autoregressive model(PVAR)to test the spillover effect of China's monetary policy on emerging economies represented by BRICs countries,and analyzing the characteristics of the spillover effect of China's monetary policy.Compared with the existing research,this paper designs a unique method to measure the openness and verify the overall effect of openness.The changes in the internal effects of monetary policy are examined from the perspectives of trade openness and financial openness,among which the study of financial openness uses the perspective of capital flows,that is,"hot money." This paper distinguishes the heterogeneity of the spillover effect of China's monetary policy on different types of external economies(United States,Eurozone,BRICs)and makes a comparative analysis.The main conclusions of this paper are as follows:(1)In the open economy,China's monetary policy has obvious output effect and price effect.As a whole,expansionary monetary policy has the effect of increasing output and inflation,and will also lead to the decrease of interest rate and the rise of exchange rate(devaluation of local currency).(2)The increase of openness makes the interest rate decrease and the exchange rate decrease(the appreciation of the local currency).From the perspective of the ultimate goal of China's monetary policy,it plays a positive role in increasing output and controlling inflation.(3)The increase of China's trade openness weakens the output effect of monetary policy in the lag period and strengthens the price effect of monetary policy in the current period.The increase of financial openness weakens the output effect of monetary policy in the lag period,but has no significant effect on the price effect of monetary policy.(4)China's monetary policy has obvious spillover effect on the developed economies represented by the United States and the Eurozone.China's monetary policy has a "locomotive" effect on the output and price of the United States and the euro area,which is mainly reflected in the long term and shows time-varying characteristics.(5)China's monetary policy spills over to emerging economies represented by BRICs through trade and exchange rate channels,and has a "beggar thy neighbor" effect on output in the short term.However,in the long run,China's expansionary monetary policy has significantly increased the trade between other BRICs countries with China,and the increase of trade has a significant increasing effect on output.Based on the above conclusions,the implications are as follows:(1)In the process of monetary policy framework transformation,quantitative monetary policy tools can still play an important role in counter cyclical regulation.China's expansionary monetary policy has an obvious effect on improving output,but it will make the inflation rate fluctuate obviously.Therefore,in the process of implementing monetary policy,we should pay more attention to the change of price.(2)Under the new form of international economy,China's openness to the outside world should continue to improve and we should pay attention to the fluctuation of exchange rate.The opening-up policy and monetary policy should cooperate with each other.At the same time,the output effect and price effect of China's monetary policy are affected by the change of openness,so we should pay attention to the change of the effectiveness of monetary policy while opening up.(3)The impact of the change of financial openness on the output effect and price effect of monetary policy is less significant than that of the change of trade openness,which is related to the current situation of China's opening up.China plays an important role in Global trade,but the capital account is under control and the financial opening is still in progress.Financial opening is an important part of opening up.While promoting the development of trade between China and the world,we should timely promote financial opening and improve the integration of China's finance and external financial markets.(4)While paying attention to the spillover effects of the monetary policies of developed economies represented by the United States and the Eurozone on China,we also need to pay attention to the spillover effects of China's monetary policies,including the spillover of our monetary policy to developed and emerging economies.By considering the internal and external effects of monetary policy simultaneously,we can coordinate developments in an open economic environment.