The U.S. Quantitative Easing Monetary Policy Spillover Effects On China Economy

In order to stimulate the sluggish economy due to the global financial crisis in2008, the Fed launched the first round of quantitative easing monetary policy at the end of2008, which was followed by the QE2, QE3and QE4. The quantitative easing monetary policy which was launched by the Fed is also called unconventional monetary policy. Its features include rate tending to zero long term, adjusting the balance sheet total assets scale and structure. In the period of the Fed launching quantitative easing monetary policy, Chinese economy had undergone tremendous changes. Although the output of China had maintained a rapid growth, both the serious inflation and the sharp decline in exports were in response that the implementation of American quantitative easing monetary policy had a significant impact on the Chinese economy.In this context, An empirical study on. the spillover effect of the Fed monetary policy on the Chinese economy and analyzing the reason leading to such impacts, has important theoretical and practical significance.The Fed balance sheet total asset as a shock variable is introduced into this article, to study its effect on the Chinese economic variables. Comparing the difference between QE before and after about the influence degree of U.S. monetary policy to China’s economy. And further research that the difference between QE before and after about the influence degree of international transmission mechanism of U.S. monetary policy to China’s economy.This article is divided into five chapters.Chapter1is an introduction. This chapter first explains the research background and significance, followed by a literature review, which generalizes literatures on the monetary policy transmission mechanism from U.S. monetary policy to China’s monetary policy, and gives the summary and commentary of the existing literature; then the chapter describes the research method, the innovation and shortcomings this paper. Chapter2is the overview of U.S. quantitative easing monetary policy. First, introduce the difference between quantitative easing monetary policy and traditional monetary policy about the intermediate target, the ultimate goal and the conduction mechanism. Second, review of the U.S. four rounds of quantitative easing monetary policy implementation background and content.Chapter3is theoretical models of international transmission of monetary policy under the open economy, which reviews the Mundell-Fleming Model and the new open economy macroeconomics model briefly, and then gives the applicability of the two models.Chapter4is the empirical study of the spillover effect from U.S. quantitative easing monetary policy to China’s economy. Through the establishment of SVAR model, using impulse response function and variance decomposition to analyze the impacts of U.S. monetary policy variables to china’s output, price, monetary policy, export and foreign exchange reserves. Conclusion is as follows:1. After the QE, the positive spillover effects of U.S. quantitative monetary policy to China output became stronger than before in short term.2. After the QE, the positive spillover effects of the federal balance sheet expansion of the total assets, which belongs to U.S. quantitative monetary policy, to China price became stronger.3. After QE, the positive spillover effects of U.S. quantitative monetary policy to China’s monetary policy has increased sharply, also can last a long term.4. U.S. quantitative easing monetary policy had a certain role in promoting China’s export in a short term, but comparing to before the QE, it may worsen China’s export situation in a long term.5. U.S. quantitative easing monetary policy had a certain role in promoting China’s foreign exchange reserves in a short term.Chapter5summarizes the impacts of U.S. quantitative easing monetary policy to China’s economy and shows some policy proposal for China to reply U.S. quantitative easing monetary policy.