The Spillover Effects Of The U.S. Monetary Policy On China’s Output

In recent years, the pace of economic globalization has been accelerating, and different countries’ monetary policies has influenced each other. Especially as the international currency dollar sovereign, a little change of the U.S. monetary policy can affect the whole world. In2007, the subprime mortgage crisis outbroke in America, and then evolved into a global financial crisis. America restored to quantitative easing monetary policy to deal with the economic downturn and to consolidate its leading economic power status. The Fed’s quantitative easing monetary policy for the four round has had a major impact on the world economy. In June2013, the Fed readjusted quantitative easing montary policy, triggering panic in the global financial market. America is the important economic and trade cooperation partner of China.The two countries interact each other in economy, finance, trade and other fields closely.In addition,policy linkage between the two countries is also particularly close. In this financial crisis, China’s economy is affected,and the growth speed of economy has slowed down. Therefore, it is necessary to pay attention to the Fed’s monetary policy, and take timely and effective measures to prevent economic and financial risks. The above factors provide an opportunity for us to study the spillover effects of the U.S. monetary policy and its conduction channels.Therefore, this paper focuses on the analysis of the transmission mechanism of monetary policy and the spillover effects of the U.S. monetary policy on china. First of all, this paper summarizes the related literature at home and abroad, introduces the process of implementation and effect of the monetary policy of the United States, and analyses the the spillover effects of monetary policy and international transmission channels theoretically. Secondly, the paper use structural vector autoregression model (SVAR) to examine the spillover effects of monetary policy. Through the analysis of impulse response and variance decomposition results, this paper draws the conclusion that the spillover effects of the U.S. monetary policy on China indeed exist. Trade channel, interest rate channel and exchange rate channel are the international transmission channels.Besides,as for the transmission direction, the implementation of the U.S. expansionary monetary policy will put downward pressure on China’s output. Finally, in the background that America gradually withdraw quantitative easing monetary policy (QE), this paper argues that China’s monetary policy authorities should pay attention to the U.S. monetary policies’ impact on China. At the same time,China should take effective measures from the development of trade, monetary policy and exchange rate system.