A Study On The Adjustment Of American Monetary Policy & Its Impact In The Post-Financial Crisis Era

Since 2007, the global financial crisis triggered by the US subprime mortgage crisis has raised new questions for the world's theoretical study of monetary policy. The current world economy has entered a post-financial crisis era. Based on the perspective of post-financial crisis, this dissertation conducts an in-depth study of the Adjustment of American Monetary Policy and its impact.An essential difference between global financial crisis beginning from 2007 to 2008 and the 1929 Great Depression is that the former hasn't triggered a disaster by virtue of measures endorsed by the governments and central banks of developed countries. Those measures successfully prevented the collapses of financial systems and created necessary liquidity to shun the breakdown of banking institutions. In comparison, the trend of open bank failure during the Great Depression once pushed the world economic towards the edge of crackup. After the outbreak of the global financial crisis in 2008, the United States stepped into the era of "zero rate". The common monetary policy based on the function of federal fund rate could not exert effects anymore. Federal Reserve Board immediately began to buy national debt and mortgage loan certificate on a large scale, which started quantitative easing monetary policy. It is proved that the adjustment of monetary policy adopted by America in 2008 has served a decisive function in coping with the life cycle of financial crisis. In the financial crisis caused by subprime mortgage crisis, the inappropriate monetary policy adopted by Federal Reserve at the early stage made the way to the explosion and expansion of the crisis. Theoretically, it is demanding to formulate mature rules to be followed for financial turmoil due to the nonlinear relationship between fictitious economy and real economy. Considering the timeliness, hysteresis and uncontrollable intensity, the improper adjustment may lead to longer economic depression or even more hidden troubles, resulting in the selection of monetary policy more like a kind of balanced art instead of science when dealing with financial crisis. Therefore, decision on the selection of monetary policy as a resolution of financial crisis vitally matters. Rigorous monetary policy decision-making mechanism should be shaped to decide a framework of monetary policy so as to then control the expansion of crisis indirectly.This dissertation mainly discusses the following matters:to be started with, the dissertation introduces its background and research significance, and reviews the former research achievements including the overflow effect in America in post-financial crisis era.The dissertation illustrates the thoughts and methods of the former research and points out the innovations and shortcomings of them. Then this dissertation briefly summarizes theories of monetary policy, and explains the foundation and influence path of monetary policy in the aspects of money demand, money supply and transmission mechanism of monetary policy. Besides, the dissertation reviews the effectiveness of monetary policy and the evolution of the foundation of United States' monetary policy theories since the Great Depression in 1930s. Next, the dissertation illustrates the history course of the evolution of America's monetary policy, and analyzes the domestic and overseas background of the adjustments of the United States' monetary policy in post-financial crisis era. The dissertation discusses the main content of American monetary policy adjustments including common monetary policy and quantitative easing monetary policy in the aspects of monetary policy tool, international transmission mechanism and exit effects, etc. Afterwards, this dissertation applies the model of VAR to do empirical research on the overflow effect on global economy by the adjustments of American monetary policy. The research mainly contains the effects of the adjustments of American monetary policy on the United States, developed economies, emerging markets and developing economies. Then the dissertation studies the essential features and influence paths of conduction mechanism of monetary policy of the United States and the influence on global economic gains. With the combination of empirical research, the dissertation clarifies the impact of the adjustments of the monetary policy of the United States in the atmosphere of superpower games in multiple views and dimensions. Besides, the dissertation chooses comparatively more comprehensive data of China to deliver an empirical test of the overflow effect on China's economy by the adjustments of America's monetary policy. The results show that, in post-crisis era, there are some differences between the overflow effect of common monetary policy and quantitative easing monetary policy, and the latter's is more prominent. Then the dissertation demonstrates the pressure brought by those adjustments on China, which is experiencing the economic transformation period. The author believes that China needs to make strategic readjustment in the aspects of economic development pattern and foreign trade strategies. At last, the author summarizes the challenges that China's economy faces in post-crisis era, and provides China economy with related advice on how to face the adjustments of monetary policy of the United States in the aspects of economic development strategy and financial development strategy.