The Empirical Analysis Of The Influence Of U.S.Quantitative Easing Monetary Policy On China’s Currency Liquidity

Under the situation of today’s highly developed information technology, theworld has become an organic whole. Obvious differences between countries in thefields of religious and political leanings as there may be, the difference can hardly beseen in economics. Under the background of economic globalization, the economiccrisis or policies of a certain country may have worldwide influence. For instance, in2007there was a serious U.S. subprime crisis, shortly the crisis spread globally. Tosolve the crisis and recover the economy, United States, Japan, and the EuropeanUnion implemented unconventional quantitative easing monetary policy successively.In the United States, the policy has been carried out for four times, lasting five years.The interest rate remains low or even zero in the U.S. Meanwhile, the nation investmoney to market liquidity to encourage investment and reduce unemployment bypurchasing agency debt and long-term government bonds. Up to now, the commentson quantitative easing monetary policy still vary greatly. Recently, the new Fedchairman Yellen also suggested that the U.S. will withdraw quantitative easingmonetary policy by the end of this year, but low interest rates will continue for sometime. Under this background, the author cast light on how the quantitative easingmonetary policy will influence the currency liquidity in China.Currency liquidity plays a role in the overall structure of economicdevelopment. Arbitrage and capital flows will cause imbalance in industrial structureand economic bubble. Therefore, the author believes that it is meaningful to explorethe relationship between quantitative easing monetary in the United States andcurrency liquidity of China. This paper first implements China’s broad money M2instead of Chinese currency liquidity to give a qualitative description of the influenceof U.S. quantitative easing monetary liquidity on China. Further, select China’s broadmoney supply M2, the Sino-US exchange rate, China import and export volume as theChinese currency liquidity proxy variables to establish a vector autoregression model,perform Granger causality test, cointegration test, and the auxiliary impulse response function to do econometric analysis, concluding that impact of the U.S. quantitativeeasing monetary liquidity on China is significant. Finally, a few suggestions are made,such as good financial supervision, paying close attention to cross-arbitrage behavior,prevention of international hot money, quickly evacuation of short-term hot moneywhich results in monetary liquidity squeeze; deepening of China’s exchange ratereform, acceleration of the RMB exchange rate market and promotion of theinternationalization of RMB; adjusting investment structure of financial institutions,channels, suppressing the “shadow banking” and other virtual economy, increasingefforts to support the real economy, and deepening the reform on overall economicwork.