The Spillover Effects Of Us Monetary Policy On The Balance Sheet Of The People’s Bank Of China

Under the background of global economic integration,the effects of monetary policies implemented by US-led developed countries not only confine to their own countries,but also possibly spread to other countries through some international transmission channels.Among them,developing countries may endure greater shocks due to their imperfect economic systems and weaker economic strength.Therefore,this dissertation takes China as an example,using SVAR model to investigate the spillover effects of US monetary policy based on relevant economic theories.The sample period from January 2003 to December 2016 is divided into three periods in order to examine the impact of fed’s monetary policies on the two items,foreign exchange reserves and credit,in the balance sheet of the People’s Bank of China during US conventional monetary policy period,quantitative easing period and its phase-out period separately.This study finds that the indicators of US monetary policy have exerted influence on China’s foreign exchange reserves and supply of credit through channels of interest rates,exchange rates and international commodity prices in all three periods.In the period of conventional monetary policy,these transmission channels played an important role.Results show that the exchange rate channel impacted China’s foreign exchange most,while the interest rate channel had the strongest explanatory power for the volatility of China’s credit.During the period of quantitative easing,the direct influence of US monetary policy on China’s credit became increasingly significant,which implied that the effects of the fed’s quantitative monetary policies such as large purchases of medium and long term treasury bonds began to appear.In the phase-out period of quantitative easing,the impacts of the above three transmission channels were further weakened and the contribution degree of US monetary policy shocks to the fluctuations in China’s foreign exchange and credit largely exceeded that of other intermediate variables.Specifically,the quantity of the fed’s purchase of medium and long term treasury bonds mainly affected China’s foreign exchange reserves,while the federal funds rate had stronger ability to explain the changing trend of China’s credit supply.During this period,US monetary policy shocks tended to cause long-term volatility of China’s foreign exchange and credit.Thus,this dissertation puts forward the following advices.On the one hand,Chinese government should strengthen the monitoring of cross-border capital and timely respond to the change of international situation;on the other hand,the government also needs to actively promote the process of RMB internationalization and to improve market-based RMB exchange rate formation mechanisms,in order to defense external risk more effectively and guarantee China’s steady economic development.