The Study On The Spillover Effects Of American Quantitative Easing Monetary Policy On China

In2008, the Federal Reserve implied quantitative easing monetary policy, inorder to stimulate economy. Today, the quantitative easing monetary policy has gonethrough over six years, experiencing times of adjustment and evolution. As theAmerican economy gradually recovered, it’s time for the policy to draw to an end. InJune2013, the Federal Reserve announced publicly that, in the next several years,quantitative easing monetary policy will gradually exit. As America is veryimportant in the international economy, it is arguably timely to analyze thequantitative easing monetary policy spillover effects at such a point in time.Among the existing study of quantitative easing monetary policy, most is basedon theoretical analysis. The remaining empirical analyses always focus on one aspectof the spillover effect, leaving global effects ignored.Based on the global vector autoregressive model, this article analysis thespillover effects in China. Viewing from the perspective of the global economy, thequantitative easing monetary policy has triggered a series of economic environmentchange, which influence China’s economy significantly. Taking data integrity and theimportance of the countries into consideration, the paper selected24countries toconstitute the empirical model, covering the United States, the United Kingdom,Japan, the euro zone, emerging market economies, and the rest of Asia, Europe andLatin America. To meet the needs of the analysis, this article selects economic output,inflation, asset prices, the real exchange rate, short-term interest rates, monetarysupplement and national reserves as domestic variables, choosing oil price asinternational variable. The result is rely on impulse responses. The empirical approach provides strong support to the existing theoreticalanalysis. The quantitative easing monetary policy influenced China’s inflation andmonetary supplement; strengthening the linkage of China’s inflation andinternational inflation, limiting China’s monetary policy independence. In addition,the policy irritates the short-term interest rate. Exchange rate appreciation isincompatible with China’s economic development. National reserve is influenced bymany factors. The capital flows offset the reduction of foreign trade, providing aboost to China’s national reserves in the long run. In short term, asset pricesexperienced volatility, but the influence didn’t last long. The effect of economicoutput level is limited. In general, quantitative easing monetary policy didn’t providesubstantial help to Chinese economy.The impulse response of developed countries and developing countries givefurther support to the above conclusion. The quantitative easing monetary policy hasdemonstration effect in developed countries, promoting the implementation of thevarious quantitative easing monetary policies. China is facing a more seriousinternational economic situation. Developing countries impulse response profile is inline with the China’s economic situation.