Analysis Of The Effectiveness Of Monetary Policy In The Context Of Globalization

Globalization is one of the most significant features of the economic development in current world.The level of international division of labor led by transnational corporations has been continuously improved.the world has formed a unified market and gradually improved.Capital seeks the optimal investment field all over the world,and central banks in various countries have also strengthened their policy cooperation with each other,and globalization has deepened.The economic development of various economies has already crossed the borders,and the closer the economic exchanges.the stronger the economic linkage among the economies.In 2008,the subprime mortgage crisis broke out in the United States and quickly spread to the world.In order to cope with the crisis,all economies adopted loose and active monetary policies in order to stimulate the development of the real economy,reduce the unemployment rate,and stabilize the price level.Under globalization,will the effectiveness of monetary policy be affected?This issue is worth exploring.This article is to study the effectiveness of monetary policy in this macroscopic context.All along,the academic community has different views and opinions on the validity of monetary policy.The classical school believes that expanding monetary policies,such as increasing the money supply,can only increase the nominal price of commodities and cannot increase output.Monetary policy is always ineffective.Later rational expectations schools also held the view that monetary policy was ineffective,but they believed that the cause of the policy invalidation was because the public's rational expectations of inflation would quickly reflect the changes in prices.Therefore,the countercyclical monetary policy adopted by the central bank does not bring about changes in prices and wage levels.The Keynesian school believes that monetary policy will affect the real economy through interest rate channels,and monetary policy is effective.However,if the economy is already trapped in the liquidity trap,the interest rate channel will be affected and monetary policy will not be effectively transmitted.The Monetarian school advocates that monetary policy is effective in the short term and long-term neutrality.As for the effect of monetary policy on the real economy,according to the Keynesian theory of marginal efficiency of capital,if the marginal efficiency of capital as the expected rate of return is greater than the market interest rate,it is worth investing in;on the contrary,if the marginal efficiency of capital is less than the market rate,it is not worthwhile,while the capital's marginal efficiency of the real economy itself is very low,even if the monetary policy brings down the interest rate,it is difficult to induce investment.Under the conditions of globalization,assets can be deployed globally.The scope of investment is greatly increased,and the increased money supply is more likely to flow to stocks and real estate markets with higher returns,and there is little real entry into the real economy.This article summarizes the research results of the existing literature and analyzes how the theoretical transmission path of monetary policy will be affected under the conditions of globalization.First of all,the inflow and outflow of foreign capital has affected the channel for the transmission of interest rates.When the central bank sets monetary policy,if the interest rate is used as the target,it must additionally consider the impact of foreign capital flows on interest rates.If foreign capital withdraws from the country because it is not optimistic about the economy,it will raise interest rates,and the policy of the central bank to lower interest rates to stimulate the economy will be affected.Compared with domestic capital,the flow of foreign capital is more complex and difficult to predict.Secondly,the substitution effect of capital on a global scale has greatly distorted the credit transmission channels,and the source of funds for fund demanders is no longer confined to their own countries' financial institutions.However,it is difficult for central banks to control the credit transmission channels which jump out of the scope of their own countries.This asymmetry compromises the effectiveness of credit transmission channels.Third,under the conditions of economic globalization,asset prices sometimes deviate from their own value levels and are greatly affected by globalization and international capital speculation,which makes the conduction efficiency of non-monetary asset price channels full of uncertainty.This paper uses the monetary policy of the United States,Japan,and China in the 2008 financial crisis as an example to analyze the effects of monetary policies in various countries.Judging from the actual economic data of various countries,on the one hand,loose monetary policies have all increased the real GDP growth rate in the short term,reduced the unemployment rate,and raised the level of inflation.However,monetary policy obviously has insufficient stamina.In the long run,GDP growth rate and CPI will hardly maintain the momentum of growth.It will always show an echoing trend.Therefore,monetary policy is effective in the short term,and the utility level in the long term is obviously declining.On the other hand,compared with the real economy,the relevant indicators of the virtual economy of the three countries,such as the stock price index,are showing an increasing trend driven by monetary policy.It shows that monetary policy has a limited stimulatory effect on the real economy.Some of its increased money supply has flowed into the virtual economy.On the basis of theoretical analysis and empirical analysis,this paper uses economic openness as an indicator to measure the level of globalization,and uses data from 2000 to 2016 in 61 countries whose data can be checked as a sample,and uses empirical analysis to further explore the validity of monetary policy.The article adopts the model of output growth rate and inflation rate constructed by Karras,and makes the following innovations:First,given the weakening impact and impact of oil prices on the macro economy,the price of oil as a shock variable in the original model was removed.Second,in the original model,the ratio of import and export as a percentage of GDP was used as an indicator of economic openness,and in fact only one aspect of economic opening was actually examined,that is,trade liberalization,this article uses a comprehensive openness index that includes financial and trade openness as an alternative,making the measurement of economic openness more accurate and enhancing the practical significance of the model.Then use the panel data to carry out GMM regression and come to the conclusion that the increase in economic openness has generally weakened the output effect of quantitative monetary policies in sample countries,and has increased the price effect of quantitative monetary policies in sample countries.Third,according to the financial crisis,the data is divided into two periods,before 2008 and after 2008,to examine the impact of economic openness on monetary policy in different periods of economic development.The results show that in the time period after the crisis,the results of the empirical analysis test are significantly more significant and are in line with expectations.At present,China's economic openness has gradually increased.This conclusion provides a basis for the formulation of monetary policy.In summary,in order to better serve the macroeconomic development and optimize China's monetary policy,this paper studies the following policy implications.First,attach importance to the role of unconventional monetary policies,actively cooperate with conventional monetary policies,learn from each other,and achieve policy objectives of mutual macroeconomic development;Second,optimizing the transmission mechanism of monetary policy,does not rely too much on the current interest rate channel,reduce the passive risk of the implementation of monetary policy;and third,promote the change of monetary policy from quantitative to quantitative and price-based.The characteristics of these monetary policies are targeted by the use of a combination of monetary policies to achieve policy objectives.Fourth,the promotion of coordination between monetary policies and other policies,it is difficult to rely solely on monetary policy to cope with complex and multi-faceted macroeconomic policy goals,so positive interaction and cooperation should be made with other policies form,making up a concerted policy.