Research America Four Rounds Of Quantitative Easing Monetary Policy Effects On China's Inflation

Inflation has been an old topic of economic research. As the level of China's economic opening to the outside world is deepening, China's inflation is more and more easily influenced by the foreign input factors. After the outbreak of the global financial crisis in 2008, as the failure of traditional monetary policy, the United States has carried out four rounds of quantitative easing monetary policy in order to stimulate the national economic development. The policy has injected large amounts of liquidity into the market. As the world's largest economic entity, the quantitative easing policy introduced by the United States will inevitably lead to lots of capital flow into China, and have far-reaching influence on China's inflation. So it is particularly important to study the influence of four rounds of the quantitative easing policy on China's inflation.This paper first analyzes the transmission path of American quantitative easing monetary policy on our country's inflation, including the exchange rate transmission path and the price transmission path. Then it analyzes the current situation and characteristics of China's inflation after the quantitative easing monetary policy introduced by the United States, which finds that China's inflation level has some different characteristics and causes before and after the quantitative easing monetary policy by the United States. Based on the theory of analysis and research, this article makes the empirical test about the impact of American quantitative easing monetary policy on China's inflation by using the VEC model with January2008-December 2014 monthly data. The empirical results show that the price rate is the main transmission path of the impact of American quantitative easing monetary policy on China's inflation, and the exchange rate also plays a key role in our level of inflation. So the way to tame inflation should not only depend on the domestic tightened monetary policy, but also pay attention to the input effects from quantitative easing monetary policy.According to the results of empirical research, this paper puts forward specific policy recommendations in order to help the Chinese government to take measures to reduce the negative impact of quantitative easing monetary policy.Firstly, China should implement the diversification of trade and reduce the degree of dependence on the international market; secondly, China should speed up theprocess of internationalization of RMB to improve pricing power of the international commodity; thirdly, China should promote the reform of RMB exchange rate system to maintain the stability of the RMB exchange rate; last but not least, China should establish early warning mechanism on price information to alleviate the pressure of domestic inflation.