Research On Monetary Policy Transmission Of Developed Countries Since The Financial Crisis

The financial crisis broke out in 2007 hit the global economy.In response to recession,central banks in developed countries have initiated practices of unconventional monetary policy.Compared with conventional monetary policy,unconventional monetary policy uses quantitative monetary policy tools and emphasis on expected management in an ultra-low interest rate environment.Typical unconventional monetary policy instruments include Quantitative Easing,ultra-low interest rates(zero interest rate and negative interest rate),and Forward-looking Guidance.There are internal logics in the design and application of these policy instruments.After the crisis broke out,central bank in developed countries stimulated the macro-economy through conventional monetary policy first,that is,regulating short-term interest rates.When short-term interest rates fell near zero,implied that entered the ultra-low interest rate environment.At this time,conventional monetary policies failed,and central bank in developed countries began to use unconventional monetary policy instrument.Initially used are quantitative easing and credit easing.Quantitative easing refers to the central bank expanding the amount of base money through large-scale asset purchase programs,which refers to the injection of liquidity into commercial banks through a series of credit facilities.Quantitative easing has achieved effects in the short term,but the data indicates that quantitative easing will lead to a problem,which is known as liquidity surplus,that is,the scale of commercial bank outstanding account is greatly expanded,and commercial banks do not transfer a large amount of credit capital to the entity in the economy.In addition to liquidity accumulation,there are other defects about quantitative easing policy.Therefore,developed country policy authorities represented by the European Central Bank and the Bank of Japan have begun to try negative interest rate policy to impose a punitive negative interest rate on commercial banks' excess liquidity in order to stimulate commercial banks to increase supply of credit.In the ultra-low interest rate environment,due to the lack of signal function of past policy interest rates,central banks emphasis on expected management,mainly through forward-looking guidance policy.After years of hard work,the economies of developed countries have begun to recover in recent years.The data shows that the growth rate of US GDP in 2017 was 4.1%,much higher than the average level in the past decade.The growth rate of CPI exceeded 2%(publicly available on the Fed website),and the number of non-agricultural employment increased by200,000,which is significantly higher than market expectations,the employee's annual salary growth rate is even more impressive at 2.9%,and the unemployment rate continues to decline(US Department of Labor non-agricultural employment report).At the same time,the economic situation of Europe and Japan has also improved The EU's GDP growth rate to1.89% in 2007,and the inflation rate reached 1.5%.It has already emerged from the predicament of negative inflation(the Eurostat website publicly available data).Japan's GDP in 2017 increased by 2.5% year-on-year,and the unemployment rate reached a low level of about 3%(Japan Cabinet Report).The CPI growth rate was 0.5% year-on-year,and it has achieved positive growth for 12 consecutive months(public data of the Ministry of Internal Affairs and Communications of Japan).As output continues to grow and employment rates continue to rise,some developed countries are beginning to show signs of excess inflation.Capital markets and commodity price bubbles are looming.In order to curb the excessive and rapid overheating of the economy in the short term,the United States has begun to implement tightening monetary regulation.The Fed began to withdraw from quantitative easing at the end of 2014,and then raise the federal funds rate from 2015.Up to now,the Fed has raised interest rates nine times,and the adjustment of monetary policy has clearly changed.In this context,it is of great significance to summarize the practical experience of monetary policy in developed countries after the crisis,explore the channels of transmission of monetary policy,and check the transmission effect and spillover effect of monetary policy.Relevant research is not only conducive to scientifically judging the transmission effect of monetary policy implemented by developed countries,but also making rational judgments on the new developments of developed countries in the field of monetary policy,analyzing and understanding the causes of differential recovery between different types of countries.The spillover effect of the economic and political system implemented by developed countries;it is also conducive to summarizing the experience and lessons of monetary policy adjustment in developed countries,and proposing policy recommendations in a targeted manner,thus providing a useful reference for the economic recovery of developing countries in the post-financial crisis period.This paper takes the monetary policy of developed countries as the main research object in the crisis,applies various technical models such as DSGE and time series model,explores the transmission mechanism of monetary policy under the background of multiple policy periods,and examines the transmission of monetary policy in developed countries from a macro perspective effects.The content of the full text is divided into eight chapter.Chapter ?: IntroductionIn order to cope with the financial crisis,central banks first used conventional monetary policy adjustments.When interest rates fell to zero,conventional monetary policies failed and they were forced to initiate unconventional monetary policies.Unconventional monetary policy contains many policy instruments.The evolution of these tools has inherent logic.The earliest used is quantitative easing,but quantitative easing has a large negative effect,the commercial banks in the euro zone and Japan have accumulated excess liquidity surplus.In order to reduce liquidity,the remaining euro zone and Japan have launched a negative interest rate policy.We choose to combine the conventional monetary policy with the unconventional monetary policy to establish a unified framework for research,which has strong theoretical and practical significance.This chapter carefully analyzes the transmission effects and spillover effects of monetary policy in developed countries since the crisis,carefully explores the reasons behind the continued economic decline and depression in developing countries,and hopes to help developing countries overcome the middle income trap and achieve real economic recovery and take-off.Chapter ?: Literature ReviewIt mainly consists of three parts.The first part is “Liquidity shock and interest rate adjustment under ultra-low interest rate environment”,the second part is “Monetary policy turn and conduction during economic recovery period”,and the third part is “Document Review”.This chapter mainly describes the research results of scholars in the past,summarizing their research ideas,research methods and possible shortcomings.Through the collation of the existing literature,we find that the existing literature has certain deficiencies in research ideas,theories and methods.Most of the current research on research ideas is limited to examining the transmission effect of single monetary policy,ignoring the characteristics of the overlapping of various monetary policy periods.In terms of theoretical research,there is a lack of detection of the effective boundary of interest rate adjustment and the transmission effect of different channels.In terms of research methods,existing research is easy to ignore the differences in monetary policy transmission under the change of interest rate environment,the difficulty in identifying monetary policy and the selection of non-conventional monetary policy substitution variables.This paper attempts to expand the research of scholars in the past and explore the adjustment of monetary policy in developed countries since the crisis.Chapter ?: The Transmission Mechanism of Monetary Policy In Developed CountriesThis chapter combines quantitative easing and differential interest rate environment,using the Markov Regime-Switching Dynamic Stochastic General Equilibrium Model(MS-DSGE)technology method,for each interest rate environment.The monetary policy adjustment framework studies the liquidity shock effect under the ultra-low interest rate environment and the differentiated liquidity shock effect under different expected management.The MS-DSGE model is an extension of the new Keynesian model of the benchmark.This paper sets the two-state Markov zone conversion characteristics of the monetary policy adjustment rules,and introduces the two-zone liquidity adjustment equation symmetrically in the two interest rate zone system.The Taylor rule corresponds to a liquidity autoregressive disturbance under the framework of interest rate adjustment.Under the fixed interest rate framework,it corresponds to a liquidity adjustment method similar to Taylor's rule,so as to scientifically examine the liquidity impact effect in two different states conduction mechanism.Because the exogenous Markov system conversion probability in the model can be regarded as an expectation of the economic agent's future economy,this paper makes the symmetry adjustment of the zone conversion probability,so that the model under the new parameter is compared with the benchmark.The model can more fully reflect the agent's rational expectation of optimism or pessimism in the future,and then compare the liquidity shock effect in two different situations,and examine the synergy effect of rational expectations on monetary policy transmission.The results show that the demand shock will have adverse effects on the macro economy under the framework of the conventional monetary policy or the unconventional monetary policy.The demand shock in the financial crisis further hits the real economy,causing the central bank to be forced to turn to unconventional monetary policy adjustment and technological impact.The stimulus effect in the unconventional monetary policy phase is weaker than the conventional monetary policy phase;in the unconventional monetary policy phase,the liquidity shock effect is stronger than the conventional monetary policy phase,which can increase the output and inflation level in the short term;After the downgrade,the effect of liquidity shocks has increased;optimistic and pessimistic expectations may have asymmetric effects on monetary policy transmission.Chapter ?: The Transmission Path of Monetary Policy in Developed Countries in Crisis:A Case Study of The European Central BankThis chapter introduces the shadow interest rate as a surrogate indicator of the easing of the euro zone's monetary policy after the crisis.Based on the macroeconomic data of the European Central Bank and the Eurozone countries,the Bayesian Vector Autoregression Model(BVAR)method is used to analyze the details.The transmission of three major monetary policy transmission paths(the asset price channel in the currency channel,the bank credit channel in the credit channel,and the exchange rate channel in the currency channel).Based on the research of Black(1995)and Krippner(2012),we introduce the shadow interest rate as a surrogate indicator of post-crisis monetary policy,and then substitute it into the statistical model to test the impact of monetary policy on macro variables.Relevant research has broken through the technical problem that the interest rate variable cannot match the macroeconomic indicators in the ultra-low interest rate environment.In practice,the true conduction effect of monetary policy can be scientifically judged,thus providing sufficient theoretical support for the central bank's monetary policy adjustment.The test results show that the credit channel and asset price channels in the Eurozone are blocked,and the exchange rate channels are smooth.Commercial banks may transfer excess liquidity to the capital market.Chapter ?: The Transmission Effect of Monetary Policy in Developed Countries in Crisis:A Case Study of The Bank of JapanThis chapter takes the Bank of Japan as the research object,based on Japan's macroeconomic data,through strict statistical methods to test the effect of monetary policy in the period of negative interest rates.Relevant research helps to make rational judgments on new developments in the field of unconventional monetary policy represented by negative interest rates,and Japan is neighbor of China,carefully studying the effects of Japan's monetary policy implemented in the crisis,summing up experiences and lessons for China.The regulation of monetary policy under the new normal has certain enlightenment.The technical aspect uses Bayesian Vector Autoregressive(BVAR)statistical techniques to test the impact of the Bank of Japan's negative interest rate and quantitative easing monetary policy on the ultimate goal.The statistical technique of vector autoregression is good at dealing with the interaction between various variables in the set of variables.In this paper,using Bayesian vector autoregressive(BVAR)statistical techniques based on vector autoregression,it can better handle the data sequence.The test results show that during the sample period of both negative interest rate and quantitative easing monetary policy,the Bank of Japan's interest rate shock effect is not good,and the liquidity shock effect is stronger than the interest rate shock,but the magnitude is not very large,indicating that monetary policy is not almighty,there are certain limitations.In addition,we have designed two robustness test methods to prove that the test results in this chapter are relatively stable.Chapter ?: The Impact of Monetary Policy of Developed Countries on Emerging Market Countries in The Crisis: A Case Study of The Federal ReserveThis chapter uses the macroeconomic data of 20 representative emerging market countries to study the spillover effects of the Fed's loose monetary policy on emerging market countries after the financial crisis.It shows that the Fed's tight monetary policy has a significant negative spillover effect on emerging market countries.Will lead to lower output of emerging market countries,lower inflation growth,and lower net exports.Loose monetary policy boosted the global expansion of the dollar and increased the financial market yields of emerging market countries in the short term.In addition,the spillover effect shows significant time volatility.For the macroeconomic variables,the spillover effect is more significant in the early stage of implementing quantitative easing.The spillover effect is relatively weak and the Fed has introduced easing policy but has not yet entered the interest rate hike.During the channel period,the spillover effect of monetary policy on emerging market countries turned from negative to positive.Chapter ?: The Differential Spillover Effect of Monetary Policy in Developed Countries During the Economic Recovery PeriodThis chapter uses the Bayesian panel structure vector autoregressive model to examine the differential spillover effects of the Fed's monetary policy from easing to austerity to developed countries and emerging market countries.Before and after the shift of US monetary policy,the economic development of developed countries has basically stabilized and risen,but developing countries seem to have been weak in growth.The same monetary policy implemented by the United States has a different influence between different types of countries.The effect,the common economic explanation seems to be difficult to fully explain the reasons behind this phenomenon.Based on two sub-samples of developed and developing countries,this paper uses Bayesian panel vector autoregressive(BPVAR)statistical techniques to test the differential spillover effects of different types of countries before and after the US monetary policy turns.The test results show that whether it is a loose period or a tightening period,most of the impact of the Fed's monetary policy is beneficial to developed countries and not to developing countries.The reason behind this may be that during the loose period,developed countries reduced exchange rates through large-scale quantitative easing and increased exports to developing countries.During the period of austerity,developed countries made full use of the status of economic powers and forced development through trade punishment measures.The Chinese countries have increased their imports and have been re-developed by drawing on the legitimate interests of developing countries.Chapter ?: Conclusions and Policy RecommendationsIn this chapter,we summarize the main research conclusions of the previous chapters,put forward relevant policy recommendations,propose the limitations of the research and propose a prospect for future research.The core conclusions of this paper are: we should be alert to trade frictions and exchange rate conflicts,make pre-plans in advance,adjust exchange rates and import and export strategies in a timely manner,and promote the further development of the domestic economy on the basis of reducing trade disputes.Although the negative interest rate policy can partially reduce the unemployment rate,increase output and promote inflation in the short term,quantitative easing monetary policy can push inflation more strongly and reduce unemployment rate.In the midst of a crisis,simply lowering interest rates may lead to a stagnation of funds.The authorities should vigorously develop the real economy and help enterprises increase their return on investment in order to effectively promote economic recovery.Most of the impact of the Fed's monetary policy is beneficial to the developed countries and not to the developing countries.The reason behind this may be that during the loose period,developed countries reduced exchange rates through large-scale quantitative easing and increased exports to developing countries.During the period,developed countries made full use of the status of an economic power,forced trade by developing countries to increase imports,and gained further development by drawing on the legitimate interests of developing countries.It is recommended to invest more energy to develop the domestic economy,attach great importance to the impact of import and export trade on the economy,actively prevent developed countries from using non-market economic means to intervene in trade,strengthen the implementation of the Belt and Road strategy and cooperation with countries along the route.Only by carefully exploring the reasons behind the continued economic downturn and depression in developing countries will developing countries succeed in crossing the middle-income trap and realizing a true recovery and take-off of the economy.