The Study Of The Monetary Policy Of The Federal Reserve Since The Global Financial Crisis

The global financial crisis which originated from the sub-prime crisis,had brought to US a great impact on the development of the domestic financial market and the growth of the real economy.In order to avoid the financial crisis going further to the depth and changing into the economic crisis,the Fed has practiced a lot in the field of monetary policy,including some traditional price-based monetary policy tools,such as the federal funds rate,the statutory reserve ratio,some traditional quantitative tools for the liquidity of the market,in addition to three rounds of quantitative easing as the representative of the unconventional quantitative monetary policy tools.The innovation and application of monetary has achieved remarkable results.The world's attention is that,as the origin country of the financial crisis,the United States has moved towards a sustainable economic recovery earlier than the euro area,Japan and many emerging economies.Based on summarizing the Fed's existing framework,function and the double objectives system of monetary policy,this dissertation has combined the current theories of monetary policy validity and central bank operation framework theory,and analyzed the application of practical experience of the Fed's monetary policy since the financial crisis.Firstly,the effective collocation between price-based policy tools and the number-based policy tools play their combined and respective roles in response to financial crisis and market repairing.The Fed seems to have no inclination to rely more heavily on what type of monetary policy,Instead,it is guided by the dual objective system of maximizing employment and stabilizing prices,aiming at solving the shortage of liquidity,and choosing the most suitable policy tool by discretion.secondly,mutual complement of the traditional monetary policy tools and innovation tools is the effective to deal with the depth of the financial crisis,and the later includes not only the quantitative easing policy,but also includes emergency assistant for systemically important financial institutions,more skilled forward-looking guidance,operation twist etc..Thirdly,in different stages of crisis evolution,the different tools of Fed's monetary policy all have their own scopes,dynamics and the actual effects,and the very important is the coordination both at time and space.Fourthly,in the period of use,the conventional monetary policies is obviously longer than the unconventional monetary policies,and it's role can not be underestimated.Although the Fed did not cut the federal funds interest rate to the zero lower limit until the end of 2008,the starting point of interest rate reduction almost matched the time when the sub-prime crisis broke out.In other words,the application of interest rate policy,including forward-looking policy guidelines,has gone through the whole market repairing process after the outbreak of the crisis,and paved the way for the smooth implementation of the unconventional monetary policy.lastly,the brave practices of the Fed's monetary policy since the financial crisis is facing enormous pressure for returning to normalization path,which includes a new round of interest rate hike cycle,the central bank's balance sheet shrinking action.at the same time,the Fed's monetary policy normalization,just as monetary policy practices in crisis,have spillover effect on global economic growth and financial market development.Generally speaking,it is the organic combination of these monetary policy tools that constitutes the central bank's operation framework and contents of the Federal Reserve's compound monetary policy since the financial crisis,and has played a crucial role in the crisis rescue.In order to further investigate the Fed's monetary policy effects in the financial crisis and its spillover effects on all over the world,this dissertation carries out some quantitative analysis through various empirical methods.First,we empirically analyze the effect of interest rate policy at the early stage of the crisis,pointing out that the initial federal interest rate reduction has the effect of expanding the market liquidity.However,due to the existence of liquidity trap,the continuing effects of the traditional interest rate policy in the latter crisis is gradually decreasing.Secondly,this paper further studies quantitative easing effects through a SVAR model,and empirical results shows that quantitative easing has a significant effect to improve economic growth,employment and price stability,while the federal funds rate maintaining the zero lower bound also has a positive effect on the inhibition of deflation.Thirdly,through the Balassa-Samuelson Hypothesis model,we examine the spillover effect of the Fed's interest rate policy on China,and the real exchange rate of RMB is influenced by the US interest rate policy,and bilateral inflation rate and the degree of financial market interaction also determine the degree of spillover effect.With the earlier exit of quantitative easing policy and the start and continuous improvement of the new round of interest rate hike cycles,the normalization of the Federal Reserve's monetary policy,which is mainly compressed by the central bank's balance sheet,is constantly pushing forward.First,at the beginning of the normalization of monetary policy,the two main tools of the Federal Reserve are increasing interest rates and reducing the sheet scale.After the early heated debate,it is a fact that “first increase interest and then reduce the scale”.The Fed can use both the balance sheet and the federal funds interest rate as a positive tool to normalize monetary policy,but the federal funds interest rate is still the first choice.Second,with the continuous advance of normalization,the Fed also need to actively adjust the balance sheet,because the decline in the balance sheet in the process of shrinking table can be largely replaced to raise the federal funds rate,and economic growth in the United States is broken down once again,the Fed may be appropriate to start principal due to re invest in to ensure that the federal funds rate operating space.Third,in the normalization of monetary policy interest rate hike in the Fed's operation,particularly the need to pay attention to matching the long-term trend of the federal funds rate and the neutral rate,but the neutral interest rate is full of uncertainty and difficulty to calculate accurately,and it means that grasp the rhythm of the Fed's interest rate leads to many challenges.Fourth,shrinking the table for the Fed monetary policy normalization is essential,and desirable balance sheets central banks can reduce the number of potential distortions in financial markets and potential financial risks,but how to determine the desired size of the balance sheet and reasonably determine the path to shrink the table is still very difficult.The study of monetary policy practices and useful experiences of the Federal Reserve since the financial crisis has important implications for improving China's monetary policy framework and enhancing the national financial governance capacity.First,the establishment of "double pillar" framework in consist of macro prudential supervision and monetary policy is very necessary and urgent,and it has important practical significance to prevent systemic financial risks and realize the diversification of monetary policy targets.secondly,in order to more effectively deal with the financial crisis and strengthen crisis relief,we need a clear dominance of central banks in financial stability and continue to promote the reform of financial supervision system.Thirdly,it is also very important to further strengthen the management of the central bank balance sheet.