Time-varying Effect Analysis Of Federal Reserve's Monetary Policy Shock On RMB Exchange Market Pressure

In the past decade,the Federal Reserve has frequently adopted monetary policy to regulate the macro-economy in order to smooth the economic cycle.However,the monetary policy of the Federal Reserve has increasingly presented an atypical operation,and its frequent switching policy mode has produced significant spillover effects on other countries.At the same time,with the accelerating process of China's opening to the outside world,China's economy has exposed more and more sensitivity to the outside world,especially after the exchange rate reform in 2005,the exchange rate of the RMB is more vulnerable to the external environment.Under such a dual background,the monetary policy of the Fed has a significant impact on the pressure of the RMB foreign exchange market.However,the effect of the Fed monetary policy on the pressure of the RMB foreign exchange market will change with the different economic environment in different economic periods,and then lead to the research conclusions based on the constant parameter econometric model lack practical economic significance,which is also the main reason for the controversial conclusions of the previous literature on the impact of the Fed monetary policy on the pressure of the RMB foreign exchange market.Based on this,this paper first combed the Federal Reserve monetary policy spillover effect,the RMB foreign exchange market pressure and other related literature,and then found the scholars' dispute and the existing problems;then take the nonlinear Grainger causality test method,based on the quarterly data from 2005 to 2016,to test the nonlinear relationship between the monetary policy of the Fed and the pressure of RMB exchange market from the aspect of quantitative monetary policy and price-based monetary policy.Finally,we take factor augmentation method to develop the classical vector autoregressive model into a factor extended vector autoregressive model,and the take the innovative random method to make coefficient matrix of the model and the covariance matrix of the perturbed term time-varying,then get a factor-augmented vector autoregressive model with time-varying coefficients,and based on the model,the impulse response of the RMB foreign exchange market pressure to the Federal Reserve's quantitative monetary policy and price-based monetary policy is analyzed.Finally,it is found that,both the Federal Reserve's quantitative monetary policy and price-based monetary policy are the nonlinear Grainger reasons of the pressure of the RMB foreign exchange market.In addition,the monetary policy of the Federal Reserve has a time-varying influence on the pressure of the RMB foreign exchange market,and the effect of the different types of Federal Reserve's monetary policy on the pressure of the RMB foreign exchange market is also different.The concrete expression is as follows: in the period of economic prosperity and economic stability,the quantitative easing monetary policy of the fed mainly causes the appreciation pressure of RMB exchange market through capital and financial accounts,while the price-based easing monetary policy of fed mainly cause depreciation pressure of RMB exchange market through capital and financial accounts;in the period of economic depression,the quantitative easing monetary policy of the fed mainly cause depreciation pressure of RMB exchange market through the current account,while the price-based easing monetary policy of fed mainly cause appreciation pressure of RMB exchange market through the current account.At the end of the article,it is expected that the Fed will implement the price-based easing monetary policy,and suggest that the Central Bank of China implement the same price-based easing monetary policy,thus reducing the depreciation pressure of the RMB foreign exchange market and maintaining the stability of the RMB exchange rate.