A Study On Price Spillover Effects Of Sino - US Monetary Policy

Since2008, the U.S. subprime mortgage crisis spread rapidly from the financial markets to the real economy, and evolved into an unprecedented global economic crisis. Countries have to adjust monetary policy. After the outbreak of the subprime mortgage crisis the United States has already implemented quantitative easing monetary policy four times, bringing the dollar devaluation and inflation, and spill to other countries. Our country has repeatedly adjusted the deposit reserve ratio and benchmark deposit and lending interest rates. To adjust with the current situation, the monetary policy of China has become from tight to loose and then to sound.What the article study is the spillover effect of the game of monetary policy between China and the United States. Essentially, the spillover effect is a kind of externality. So the motive of this article is to study the effects of monetary policy game between China and the U.S. to bring to the price of China.At first, in the first part of the article, the scope of the study will be defined, including the purpose of this study, a clear overall research ideas and frameworks, as well as the problems need to explain. Then, the second part is to summarize the former studies and researches. The relevant topics of foreign literature include international coordination of monetary policy, policy game research, spillover effects of monetary policy. While the studies in China started late. The themes focus on the effect of the U.S. monetary shocks on Chinese economy and whether the independence of Chinese monetary policy has been affected. Thirdly, in part three the interaction between China and the U.S. monetary policy will be analyzed from the point view of game theory. After that the evidence of the relevance between the monetary policy of U.S and China is served. Meanwhile the result of a simple econometric model also illustrate that the change in U.S. monetary policy did cause a change in Chinese monetary policy. The fourth part of the article is to explain the theory of how the prices transfer internationally, and use static game model to simulate the price spillover effect of China-US monetary policy game. The fifth part is the empirical research. In this part the first step gives the evidence that the U.S. monetary policy does affect China’s monetary policy. Then the second step is to do regression analysis of the spillover effect model, with the lagged variables introduced into the equation of the price spillover effect, the static game can be adjusted to dynamic game which is the basic step of the empirical test, and use the regression equation to estimate the factors affecting price level. At last, the sixth part of the article is to summarize and give policy recommendations. To improve the effect of monetary policy, China should maintain its own independent monetary policy and make a difference in the policy game.