The Impacts Of The Quantitative Easing Monetary Policy Of Fed’s And China’s Countermeasures

With the global financial crisis in2008, the world economy was devastatedseriously and many developed countries suffered severe recessions. Governments didwhat they can to stabilize the world’s financial markets and stimulate the recovery ofthe sluggish economy. But faced with the unprecedented magnitude crisis and theconstraints of the economic structure, the conventional macro-control policy had littleeffect. In this situation, many countries led by U.S. turned to the quantitative easingmonetary policy for help. From2008to2011, the Fed has introduced two rounds ofquantitative easing monetary policy with huge scale and released large amounts ofliquidity to the market. Especially, the second round of quantitative easing policysuffered a worldwide criticism as soon as it started and most countries focused theirattentions on the impacts of the policy to stimulate the recovery of U.S own economyand the effects to other countries. Meanwhile, as the largest and fastest-growingemerging market economy in the world, China may be affected more by the QE policy.In this context, it has important theoretical and practical significance to do acomprehensive and systematic study about the effects and combined impacts of theFed’s QE policy and develop some effective coping strategies.Under this background, based on the review and summary of the basic contentsof the QE policy, this paper analysis its effects on the U.S. economy, world economyand China’s economy in-depth from both theoretical and practical aspects.This paper is divided into six parts.Chapter1is the Introduction of the paper. First it puts forward the importanceand necessity of studying the impacts of the Fed’s QE policy on the U.S. economy andthe world economy under the special background that the US-led world economy hasentered the "era of quantitative easing" after the global financial crisis. And secondly it summarizes the research achievements of the relative topics in the domestic andforeign academic circles on the Quantitative easing policy of Fed’s. Finally, it gives abrief introduction about this article’s innovations and shortcomings.Chapter2gives a main introduction of the Federal Reserve’s Quantitative Easingmonetary policy. First, it states the definition of quantitative easing and a brief reviewof its characteristics, and then summarizes the contents, background and reasons ofQE1and QE2. Then, this paper divides the overall course into six chronologicalstages and analysis the characteristics of each stage. Meanwhile, it also introducesseveral major innovations on operation tools of the policy.Chapter3gives a detailed study of the running effects of the Federal Reserve’squantitative easing monetary policy. First, analysis the mechanisms from thetheoretical aspect, including asset allocation re-balancing mechanism, the cost of theinterest rate mechanism, the exchange rate adjustment mechanism, the wealth effectmechanism and the expected action mechanism. Then it evaluates the effects of QEpolicy in the actual situation and in-depth analysis the reason why the policy did littleto stimulate the recovery of economy in the U.S.Chapter4analyzes the impacts of Fed’s quantitative easing monetary policy onthe U.S. economy. It not only analysis the benefits of QE policy in stabilizingfinancial markets, boosting market confidence, transferring the debt and crisis, butalso points out that the policy will have a negative impact to the recovery of the U.S.economy in the long term.Chapter5analyzes the impacts of Fed’s quantitative easing monetary policy onthe global economy. Since the policy is a "beggar thy neighbor" approach, this sectionmainly focus on its negative impacts to the world economy, including currencymanipulation, the potential trade wars and protectionism, stimulation to theinternational commodity prices, the inflation in emerging economies, damage ofinternational financial cooperation mechanisms and so on.In Chapter6, this paper gives a detailed analysis further of the impacts of Fed’squantitative easing monetary policy to China’s economy in many aspects such as imported inflation, the deterioration of trade and the reserves of foreign exchange.And it also puts forward some suggestions and proposals combined with China’sreality.