Research On The Spillover Effects Of Quantitative Easing And Normalization Of US Monetary Policy On China's Monetary Policy

With the promoting progress of globalization and the increasing economic exchanges between countries,the formulation of a country's monetary policy depends not only on its own economic situation,but also on the monetary policies of other countries.As the economic relationship between China and the United States is increasingly closer,the impact of US monetary policy on China's monetary policy has become an important issue that cannot be ignored.The US monetary policy was adjusted frequently after the financial crisis,where the quantitative easing monetary policy and the subsequent normalization of monetary policy were made by the US government to improve the economic situation.However,the adjustments of the US monetary policy affected the monetary policies of China notably,which increased difficulties on the formulation and implementation process of China's monetary policies.Therefore,researches on the impact of US monetary policy on China's monetary policy have great practical significance,and it can provide theoretical basis on the formulation and adjustment of China's monetary policy.This paper investigated the spillover effects of quantitative easing and normalization of US monetary policy on China's monetary policy via the combination of theoretical analysis and empirical testing methods.Above all,the paper summarized the monetary policy evolution of China and the United States after the financial crisis,and analyzed the spillover effects of US monetary policy on China's monetary policy from the perspective of empirical facts.Furthermore,the paper investigated the transmission channels and mechanisms of the monetary policy spillover effect from theoretical perspective,where basic assumptions were raised according to the theoretical and empirical facts.Besides,a VAR model was developed to analyze and verify the spillover effects of quantitative easing and monetary policy normalization on China's monetary policy.Meanwhile,comparisons and analysis on the intensity and channel of the spillover effect between the two stages were made.Based on the research conclusions,relevant policy recommendations were proposed in the end of this paper.The main conclusions of the thesis are summarized as follows: Firstly,the spillover effect of US monetary policy on China's monetary policy is remarkable,and the normalization of US monetary policy has a greater spillover effect on China's monetary policy than quantitative easing.Secondly,the US monetary policy will have a spillover effect on China's monetary policy via capital flow channel,which is the dominate channel among the spillover channels of quantitative easing and normalization of the US monetary policy.Thirdly,the US monetary policy can influence China's monetary policy through exchange rate channel,which is also one of the main spillover channels for quantitative easing policy to the monetary policy of China.However,the importance of the exchange rate channel declines significantly within the spillover channels of the US normalized monetary policy.Finally,the US monetary policy is also proved to have spillover effects on China's monetary policy via trade channels,and its importance among the spillover channels of the US normalized monetary policy has increased comparing with the previous period.