Research On The Practice,Exit And Policy Choice Of The Unconventional Monetary Policy

Most of the central bank of advanced economies have turned to the monetary policy based on the short-term interest rate since 1990s.Under a stable environment of the macro economy,the authority can manage to regulate and control the monetary system using conventional policies,with which they can build an integrated tern structure of the interest rate.However,things cannot happen when the nominal rate is near to the zero lower bound.That is to say,conventional policies don’t work on stimulating the economy,under which circumstances the unconventional monetary policy is born to stabilize the financial market as a primary target.Unconventional monetary policies have played an important role in the Great Depression,the collapse of Japanese asset bubble in 1990s,and the global financial crisis since 2007,which successfully helped to maintain a stable and healthy financial market.The thesis defines the unconventional monetary policy as a tool,implemented by the central bank,aiming to stabilize the market and recover the prosperity of the economy,which can supplement the liquidity by channels like changing the structure and scale of the central bank’s balance sheet,or the public anticipation.The thesis summarizes three transmission mechanisms of the unconventional monetary policy on the perspective of the Federal Reserve.The first is the composition effect of the balance sheet,which the central bank can use to prop the market by adjusting mid-and-long term interest rate and leading a decline of the rate structure.The second is the scale effect of the balance sheet,which the central bank can give the liquidity support to revitalize the economy by asset purchasing projects such as the Quantitative Easing.The third is the effect of anticipation,the Fed can primarily keep the public confidence to future of the financial market,and then rejuvenate the investment and output using this consensus.As the empirical part,the article makes a research on the practice and exit of unconventional monetary policies based on SVAR model and event analysis.On the practice effect,the thesis establishes the impulse response function among parameters,using indicators M1,consumer confidence index,federal fund rate and gross industrial production to represent the money supply,market anticipation,benchmark rate and total output respectively.The test result tells that,the money supply and the output have not only insignificant impulse response but a large deviation,which can prove the reality of the liquidity trap and the money supply not being a target of the Fed.The test result between the anticipation and the output illustrates that a positive market expectation can play a positive role to the real economy,although there is a lag of the anticipation shown in the response.The low rate commitment given by the Fed during QE truly proves that it can support the confidence of the market and further stimulate financial conditions.The impulse response from the benchmark rate to the output states that,the federal fund rate is effective as the target of monetary policies.The overall fall of the interest rate generates a promising outcome to the private sector’s investment and the output.The thesis,using the event study,also picks five typical incidents representing the American QE process,aiming to measure the practice result of the unconventional monetary policy.The consequence shows that the QE gives a remarkable influence on market yields,where firstly incardinated in the Treasury Bond,and then other types of bonds and financial assets.On the unconventional monetary policy exit,the paper also utilizes the theory of event study,picking up seven affairs which can typically represent the exit or exit expectation of the unconventional monetary policy.Given different terms of Treasury Bonds,interest swaps and corporate bonds,the accumulated fluctuation of yields during the window phase of the event testifies that the unconventional monetary policy exit of the Fed has an influence on market yields,which on the other side proves the transmission mechanism working.Finally,the thesis summarizes related experiences of main economies such as the U.S.,Japan and the Euro Zone,and possible effects on domestic macro economy.We predict that our monetary policy framework will switch from a scalar type to a price type,after when experiences from advanced economies will become valuable references to Chinese central bank.Making full of the unconventional monetary policy,it will provide us a safeguard to domestic financial conditions and economic prosperity under special circumstances...