A Study On The Spillover Effects Of Monetary Policy Of Major Countries

After the financial crisis in 2008,the main economies adopted unconventional loose monetary policy to the peripheral countries of interest rates,exchange rates and liquidity have varying degrees of spillover effects.With the differentiation of the economy and the leverage cycle after the crisis,the main international currency issuers began to withdraw from unconventional policies.The United States launched the QE reduction program in 2013,to the end of 2014 officially ended QE.December2015,the Fed raised interest rates for the first time since the crisis,the second increase in interest rates in December 2016.But it is different from the past,in addition to the United States and other major economies such as Europe,Japan and Chinese are in a more relaxed period,including Europe and Japan respectively at the end of last year and early this year to take a negative interest rate,and Chinese and start at the end of 2014 after the rate cut cycle,the current benchmark interest rates at historic lows,liquidity abundant capital market.Under the background of the monetary policy differentiation of the major economies,the study of the relationship between monetary policy spillover and the degree of the financial market has become the hot spot.Rey put forward the famous "dilemma" theory,she believes that large economies can affect the edge state through capital flows,credit expansion,transnational bank credit and other channels,so that the relationship between the selection and the effectiveness of the monetary policy of the exchange rate system becomes less significant.The "Impossible Triangle" is simplified as a dilemma between capital account liberalization and monetary policy independence".In the United States to tighten monetary policy as a series of core countries arise spontaneously exchange rate overflow problem: whether the spillover effect of changes in the monetary policy of the United States weakened in large economies monetary policy differentiation environment? No matter what kind of exchange rate regime is adopted,the effectiveness of a country's monetary policy and the financial market will inevitably be affected by the monetary policy and the financial market of the core economies? Is China's monetary policy and financial market spillovers increasing? In addition to the exchange rate regime,what are the variables at home and abroad that explain the sensitivity of a country's monetary policy and financial market to the monetary policy of the core countries? In order to cope with the impact of the global financial cycle,international economic policy and financial policy still have the space of cooperation and coordination?In order to find the answers to the above questions,this paper focuses on the impact of changes in key monetary policy variables(short-term policy interest rates,exchange rates)in the core countries(US,Europe,Japan,China)on the financial conditions of peripheral countries.The empirical study in this paper is divided into two steps.First,the author constructs a set of panel VAR models to estimate the impact of monetary policy interest rates(shadow interest rates)and actual effective exchange rates on the monetary policy variables of peripheral countries.Through the empirical study,the author finds that the Fed policy interest rate(shadow interest rate)has a significant spillover effect on the short-term money market interest rates of peripheral countries from 2009 to 2013,but from 2014 to 2018,the spillover effect of the FED shadow interest rates on short-term money market interest rates in peripheral countries has become insignificant.After the start of the US interest rate hike cycle in 2014,the monetary policy differentiation of the core countries weakened the spillover effects of US monetary policy on peripheral countries.The real effective exchange rate in the United States has a significant spillover effect on the real effective exchange rate of peripheral countries during the periods from 2009 to 2018.Among the three subsamples,the samples from developing countries suffered the most significant spillovers.It shows that different countries have different responses in the face of the spillover of monetary policy in core countries.In the second part of the empirical study,the author studies the reasons why peripheral countries are different in the face of the spillover of monetary policy variables in the core countries.The author estimates the relationship between the fundamentals of each country and the differences in exchange rates and stock market movements.The results of the study show that investors will make differentiated investment behaviors based on different fundamentals in each emerging country.Especially when the author uses the comprehensive fundamental index of all the fundamental variables to estimate,the correlation is statistically significant.From the results,as long as emerging countries can take practical measures to enhance their economic fundamentals,then in the face of the spread of the shock,such countries' exchange rates will be less affected.The author further examines the different performance of exchange rates in emerging markets since the 2008 international financial crisis.The author's research shows that the difference in exchange rate performance caused by fundamental differences has become more and more significant after 2008.Then,we discuss the necessity of strengthening the communication and coordination of international monetary policy under the framework of G20,and put forward some suggestions on the coordination of monetary policy.