An Analysis Of The Effect Of China And U.S.Monetary Policies On Bulk Commodity Prices

Since the beginning of twenty-first Century, the "roller coaster" fluctuation of bulk commodity prices has caused great impact on steady-growth of China’s economy, experts started to pay more attention to the cause of the volatility of bulk commodity prices. Some studies found that since2000, the negative correlation between the dollar index and CRB index is further enhanced and up to-0.87, so it is thought that the United States monetary policy has became the determinate factor of bulk commodity prices; After the2008global financial crisis, China issued a plan about economic stimulus which contains4Billon RMB and it resulted in the bulk commodity prices rally, for this phenomenon, some experts believe that China’s moderately loose monetary policy is the main reason for the rise in bulk commodity prices. Whether the US monetary policy is the determinate factor of bulk commodity prices? Whether the effects of China’s monetary policy was enhanced after2008? This paper will discuss these problems through empirical analysis.Based on the domestic and foreign relevant research results, firstly this paper describe and analyze the volatility of bulk commodity prices in recent20years which based on the development of Sino US bulk commodity futures market. Clarify the influence factors of supply and demand in bulk commodity prices, confirmed that the Sino US monetary policy is an important factor which affects the bulk commodity prices. Then it analyzes the direct and indirect pathway which about the Sino US monetary policy how affects on bulk commodity prices, and proves that the monetary policy change the investment decision of investors through direct effects on asset portfolio effect and expected income. Thereby the monetary policy could affect bulk commodity prices.This paper use event study confirmed the adjustment of the Sino-US interest rate short-term impact on bulk commodity prices, by analyze38times adjustment of the Fed’s federal funds rate and20times adjustment of the People’s Bank of China’s one-year deposit interest rate which affected SBCC, copper index in London, crude oil index in US during the period of2000-2014, which find it is not more than30%event points when Sino-US interest rate adjustments significantly affected on commodity prices, Chinese interest rates have a increased impact after2008.For further analyze when the macro-economic structure changes the long-term impact of Sino-US monetary policy on bulk commodity prices, this paper analyze the data from1996-2014. Use the monetary supply of China and the United States (M2) as independent variables. Use the gross industrial output value of China and the United States as controlled variables. Use the bulk commodity prices as dependent variables. This paper establishes the MS-VAR model for empirical analysis, the results shows:1. The Sino US monetary policy is not the determinate factor of the volatility of bulk commodity prices over a long period of time.2. The Sino US monetary policy have different impact on bulk commodity prices during different economic status:during economic contraction, monetary policy affects weaker on bulk commodity prices; during stable period of economic growth, monetary policy impact on bulk commodity prices mainly based on money supply M2; during expansion of economic growth, the adjustment of monetary policy interest rate mainly impact on bulk commodity prices.3. Results reveal that with China’s economic growing after2008, China’s economy and monetary policy factors have increased influence on bulk commodity prices.By the means of empirical analysis, this paper confirm that the Sino US monetary policy is not a determinate factor of bulk commodity prices; The Sino US monetary policy have different impact on bulk commodity prices during different economic status; China’s monetary policy has a significantly strengthened effect on bulk commodity prices after2008. These conclusions provide a basis for the correct prediction and analysis the change of bulk commodity prices, which help us to reduce the influence of economy of our country caused by the volatility of bulk commodity prices.