Empirical Study Of Unexpected American Monetary Policies Surprise Spillovers On Hong Kong Financial Markets

Monetary policies include all kinds of regulatory methods used by the central bank of a country in the field of currency and credit in order to realize certain economic goals. In the open economic environment, different countries are interdependent on each other closely. The domestic policy of balancing import and export in one country could affect other countries'policies and consequently affect its own economy, which forms the spillover effect. The rational expectations theory holds that the only effective policies are those unexpected.This article demonstrates how the spillover effect occurs with the following models, including transmission mechanism of traditional monetary policy theory, the transmission mechanism theory of the monetary policies in the open economic condition, and the financial model of rational expectation theory. Proper variables are chosen to form a 6-element model to do the empirical study by using the daily data of the financial assets in Hong Kong from 1999 to 2008. The research shows there is an obvious effect on changing the impact by the non-expected monetary policies of the USA. Meanwhile, this article also looks into some other important elements which can influence the change of the financial yield. Lastly, based on the analyses of the currency board in Hong Kong and foreign experiences, some suggestions are proposed to solve the problems in the transmission mechanism of the monetary policies in Hong Kong.