A Study On The Spillover Effect Of Monetary Policy In Theory And China’s Empirical

With the sustained,rapid and healthy development of the economy,the exchange of economic and financial aspects of the world is becoming more and more frequent.At the same time,the mutual influence of monetary policy between countries has been strengthened.In 2009,China became the world’s second largest economy.It is of great theoretical and practical significance to study the spillover effect of China’s monetary policy on other countries macroeconomic.However,there are few literatures to study the spillover effects of China’s monetary policy on Asian countries.Therefore,this paper has chosen five countries such as Indonesia,Malaysia,Philippines,Japan and Korea as representatives of Asian countries to study the spillover effects of China’s monetary policy on Asian countries.Firstly,this paper makes a study on the transmission channel of monetary policy spillover effect from the economic perspectives such as interest rate channels,exchange rate channels,and trade output channels.Secondly,this paper chooses the interest rate as a measure of our traditional monetary policy and selects the gross domestic product,consumer price index,interest rate and broad money supply as the measure of the spillover effects of China’s monetary policy on Indonesia,Malaysia,Philippines,Japan and Korea,and using the vector autoregressive model to analyze the spillover effects of China’s monetary policy on Asian countries.Then,this paper chooses as a measure of our non-traditional monetary policy and uses the vector autoregressive model to re-examine the spillover effect of our monetary policy on Asian countries.Finally,this paper puts forward relevant countermeasures and suggestions according to the empirical research results and realistic situation.The results suggest as follows:(1)The spillover effect of China’s interest rate on the total output of Indonesia,Malaysia,Philippines,Japan and South Korea does exist.The rise in China’s interest rate has negative spillover effects on the total output of Indonesia,Malaysia,Philippines,Japan and Korea.(2)The spillover effects of Chinese interest rates on price levels of Indonesia,Malaysia,Philippines,Japan and Korea do exist,but there are differences in the impact of the price level of the five countries.The rise in China’s interest rate leads to an increase on the price level of Indonesia,Malaysia and Japan.The rise in China’s interest rate has no effect on the price level of Philippine in the short term,but will lead to a decline in the long term.The rise in China’s interest rate leads to higher prices in Korea in the short term,but leads to the decline in the long term.(3)The spillover effect of interest rates on interest rate of Indonesia,Malaysia,Philippines and South Korea does exist,but the impact on interest rate in these four countries is different.The rise in China’s interest rate has a positive impact on Indonesian’s interest rate,but has a negative spillover effect on the Malaysian and Philippine’s interest rate.The rise in China’s interest rate leads to an increase in interest rates of South Korea in the short term,but leads to a decline in the long term.(4)The spillover effect of China’s interest rate on the broad money supply of Indonesia,Philippines,Japan and South Korea does exist,but has no effect on Malaysia’s broad money supply.The rise in China’s interest rate has a positive impact on the generalized money supply of Indonesia,Philippines and Japan,but has a negative spillover effect on Korea’s broad money supply.(5)The spillover effect of China’s broad money supply on the total output of Indonesia,Malaysia,Philippines,Japan and Korea does exist,but there are differences between the five countries.The increase in China’s broad money supply leads to an increase in the total output of Indonesia,Malaysia and Philippines.The increase in China’s broad money supply leads to a reduction in total output of Japan in the short term,but leads to an increase in the long term.The increase in China’s broad money supply leads to an increase in total output of Korea in the short term,but has no effect in the long term.(6)The spillover effect of China’s broad money supply on price levels of Indonesia,Malaysia,Philippines,Japan and South Korea does exist,but the impact on these five countries is different.China’s broad money supply has a positive impact on prices of Indonesian and Philippine,but there is a negative spillover effect on the Japanese’s price level.The increase in China’s broad money supply leads to a reduction in price level of Malaysian and South Korea in the short term,but leads to an increase in the long term.(7)The spillover effect of China’s broad money supply on interest rates of Indonesia,Malaysia,Philippines and South Korea does exist,but there are differences in the impact of these four countries.China’s broad money supply has a negative spillover effect on Indonesian’s interest rates,but has a positive impact on South Korea’s interest rates.The increase in China’s broad money supply leads to a decline in interest rates of Malaysia in the short term,but leads to an increase in the long term.The increase in China’s broad money supply leads to a decline in interest rates of Philippines in the short term,but has no effect in the long term.(8)The spillover effects of broad money supply in China on the broad money supply of Indonesia,Malaysia,Philippines and South Korea do exist,but the impact on these five countries is different.China’s broad money supply has a positive impact on the money supply of Indonesia,Malaysia and South Korea,but there is a negative spillover effect on Japan’s supply.The increase in China’s broad money supply leads to a reduction in the broad money supply of Philippines in the short term,but leads to an increase in the long term.Based on the above research results,this paper puts forward some relevant countermeasures and suggestions of China’s monetary policy from the aspects of the development of a reasonable monetary policy,the internationalization of the RMB process,the reinforce of coordination and cooperation with Asian countries monetary policy,deepening China’s financial reform and playing monetary policy effectiveness and independence and so on.