The Spillover Effect Of Monetary Policy Divergence Between America,Japan And Europe On China's Monetary Policy

Since the financial crisis at 2008,with the United States as the leader,so many countries have adopted quantitative easing monetary policy to revive the economy.Unlike price-based monetary policy,QE aims to boost the economy in a short time by injecting liquidity directly into the market.However,this time,the crisis was fierce and widespread.Until now,many countries are continuing to expand the scale of assets-buying,which leads to a flood of market liquidity and the capital flowing quickly among countries.While the economic trend of most countries in the world is still unclear,the economy environment in America is becoming better.In 2013,the United States began to gradually withdraw from the quantitative easing monetary policy,and in December 2015 started the interest rate hike cycle,which means the era of ‘zero interest rate' ended and monetary policy tended to be normal.Although the recovery of the euro zone and Japan is slower than that of the United States and the direction of loose monetary policy is still maintained at this stage,consideration has also been given to tightening currencies and reducing asset purchases in these days.Since then,the monetary policy of the three major economies has been polarized.At the 2017 Economic Work Conference,the Chinese Government indicated that it would continue to implement a sound and neutral monetary policy.But,with the deepening of China's capital openness,the further improvement of floating exchange rate mechanism,the acceleration of the establishment of market-oriented interest rate system and the acceleration of RMB internationalization,China's monetary policy is increasingly subject to spillover effects from other countries' monetary policies.Therefore,in the face of such complex challenges of international monetary policy environment,it is practical to analyze the spillover effect of monetary policy from major economies.This paper combines qualitative and quantitative methods.Firstly,it combs domestic and foreign scholars' research on spillover effect of monetary policy.Secondly,a thorough study of the Mundell-Fleming-Donbush model will lay a solid theoretical foundation for the analysis of the spillover effect of monetary policy in this paper.Then it summarizes the background and changes of monetary policy formulation of the United States,the euro area,Japan and China from 2007 to 2017.After qualitative descriptive analysis,this paper chooses the data of monetary policy related variables from June 2007 to December 2017 as samples,uses the spillover index model proposed by Diebold and Yilmaz in 2009 to make static and dynamic quantitative analysis,and draws the following conclusions: 1)the spillover effect of monetary policy from other countries has a high explanatory power to the change of monetary policy in China.The spillover effect from the change of monetary policy between the United States and Japan is greater than that between the United States and Europe;2)among the three main transmission channels of spillover effect,capital flow channel and exchange rate channel have much more significant effects;3)the increase of China's participation in the international market has increased the policy spillover effect from other countries and the ability of China's monetary policy to influence other countries' policy-making;4)compared with the same monetary policy,when the US,Euro zone and Japan diverge their monetary policies,the impact on China's monetary policy spillovers will increase.In view of the above conclusions,some suggestions are put forward as follows: 1)to continue the sound monetary policy and use a variety of policy tools to adjust flexibly;2)to accelerate economic restructuring and improve the ability to resist spillover effects;3)to improve the establishment of macro-prudential system.