The Spillover Effect Of U.S. Monetary Policy Shock On China's Economy

As the dollar in the international monetary system's dominance is still stable nowadays, so American monetary policy is easy to be spread to the stable economic situation in other countries. Therefore, researching American monetary policy spillover effects on China's economy and the transmission mechanism has the important theory significance and the practical significance.This paper conducts a comprehensive study on the American monetary policy spillover effects the economy in China. By using Mundell- Fleming- Dombush model, NOEM model which conduted as the theoretical foundation and choose the monetary policy spillover effect as the breakthrough point, this paper analysis the spillover effect of monetary policy through interest rate, exchange rate, trade, and international capital movement transmission channels. In the empirical analysis, this paper adopts the empirical model SVAR model which can explain economic meaning. This article selects the between December 2008 and July 2008 monthly data as samples. Through data stationarity test, Granger causality test,impulse response function of the econometric analysis, to verify the influence of American monetary policies on our economic variables. The result shows that the spillover of American monetary policies on China's economy was actually existed. Except the short-term impact on China's GDP is negative impact, most of all belong to temporary positive impact.In addition, Chinese output response degree of U.S. monetary policy variables are smaller than the degree of response policy variables, compared to the interest rates, net export and the exchange rate. In the long term, U.S. monetary policy on the spillover effects of the economic variables are converges to zero. In the end, this paper puts forward relevant policy suggestions. In the monetary policy decision-making process in our country, the central bank should strengthen the independence of the policy, at the same time the attention of the international coordination of monetary policy; steadily promote the reform of RMB exchange rate formation mechanism and accelerate the interest rate marketization process; to improve the structure and the level of China's export products, export market diversificatio;to improve the current written guarantee system, adopt relatively flexible exchange rate system; to strengthen the supervision of international liquidity analysis, all these for reducing our country's economic risk while facing with other countries' monetary policy impact.