Study On The Impact Of American Quantitative Easing Monetary Policy On China’s Economy

After the global financial crisis, the U.S. economic was in downturn. The Fed R implemented quantitative easing monetary policy to inject a lot of social mobility in order to get out of the doldrums as soon as possible. The oversupply devaluated the dollar and appreciates other foreign currencies. As a result the implementation of QE in the U.S. recovered the economy but also caused some spillover effects on other economies. Due to the increasingly strong economic recovery, the Fed started in to reduce the scale of QE in January2014, which is expected to completely exit within the year. Close economic ties exist between China and the United States, what kind of impact will the quantitative easing monetary policy implementation process produce on the Chinese economy, what kind of impact on China will be caused if QE exits, which are issues to be examined. As a result, it is necessary to study the impact of U.S. monetary policy adjustments for China’s economy, the Chinese risk aversion in the process of economic activity and economic decision-making and develop responses. In order to test the impacts from US quantitative easing monetary policy on China’s economy, this paper concludes and combs the current literatures, analyzes the effects to carry out the quantitative easing monetary policy based on the transmission mechanism of monetary policy, also this paper tests the impact of American QE monetary policy on China’s economy and forwards recommendations. The paper is divided into five parts:The first part is an introduction, mainly introduces the background, significance and relevant research status and results, the paper also describes the research framework.The second part is the theoretical basis and the transmission mechanism of monetary policy, firstly it defines the concepts of monetary policy, followed by the introduction of the domestic monetary policy transmission mechanism and pathways, and finally focuses the spillover effects of monetary policy and conduction channels in the open economy.The third part introduces the background and evolution of the QE monetary policy in the United States and analyzes the effects of the implementation of the policy on national economy and the spillover effects on foreign countries.The fourth part uses a structural vector auto-regression model SVAR to examine the effects of U.S. QE monetary policy on the Chinese economy. With the U.S. broad money supply index as a proxy for the U.S. QE, the paper make the quantitative analysis of its impact on Chinese net exports, interest rates, exchange rates and macroeconomic indicators of GDP, bank lending consumer price index. The results prove that the implementation of the U.S. QE significantly affects RMB exchange rate in the transmission channel, has some explanatory power on the interest rates and Chinese exports, and have much explanatory power on the macroeconomic indicators CPI but doesn’t have much explanatory power on GDP.The fifth part concludes and summarizes the paper and forwards the corresponding policy options and recommendations for China in face of QE exit.