The Impact Of Federal Reserve's Monetary Policy On China's Spreads,Exchange Rate Differences And Research On Arbitrage Application

As the financial globalization,the world economy is closely linked to the unprecedented degree,the degree of influence between countries is also deepening.The United States as the world's largest economy,whose monetary policy will have a huge influence on other economies.As the monetary policy between China and the United States is not synchronized,the size of the spread of China and the United States will be affected.In addition,because China's capital control,the offshore and onshore market exist obvious market segmentation,the offshore market is more sensitive to external shocks.The Fed's monetary policy implementation would result in the volatility of domestic and foreign exchange differences.So the research of the Fed's monetary policy impact on China's spreads,exchange rate differences is more important.On this basis,the study of cross-border arbitrage application can strengthen the domestic and foreign market contact and interaction,it can also narrow the price difference between domestic and foreign markets,which has outstanding practical significance.Different from the literature with a fixed coefficient SVAR model for empirical analysis,this paper uses the TVP-VAR model to compare the influence of the Federal Reserve's monetary policy on China's spreads and exchange rate differences.This method can accurately describe the structural mutation of economic variables,reflecting the application of measurement model innovation.And on this basis,the application of cross-border arbitrage combined with the case analysis,reflects the content of innovation.First of all,this paper suimmarizes the theoretical basis.The paper leads out the international transmission of monetary policy theory model——Mundell-Fleming model and the new open economy macroeconomic model.And the theory of time-varying vector autoregressive(TVP-VAR)model and arbitrage motivation are expounded.Secondly,this paper uses the Federal Reserve balance sheet size(FEDB)and the Fed's money supply(M2)as the Federal Reserve 's monetary policy proxy variables.and study the infliuence of the Federal Reserve's monetary policy on Chinca's spreads exchange rate differences by constructing the TVP-VAR mode.The results shlow that the positive FEDB and the positive M2 impact have a positive effect on spreads and domestic and foreign exchange differentials.At the same time,as time goes by,the Fed's monetary policy impact on them gradually increases in intensity.In addition,the impulse response based on different time points indicates that the impact of the balance sheet size on spreads is time-varying,and the impact of the Federal Reserve's money supply on spreads is almost no trime-varying.For the impact of FEDB and M2,the impact of domestic and foreign exchange rates in the short term is not mutated,but in the long-term differences.Finally,this paper is based on the two sets of arbitrage motives in the process of monetary policy,such as the interest rate differences and exchange rate differences.And the paper studies the application of cross-border arbitrage in practice,that is,the practical application of spreads arbitrage and exchange rate differences arbitrage,combined with the case to illustrate.