Research On Influence Of International Capital Flow On The Effectiveness Of China's Monetary Policy

Since twenty-first Century, China's regulation on capital projects is gradually liberalized. In the long run, China's economic has been able to maintain the trend, in which the net inflow of international capital plays an important role, but it also brings some negative effects. One is to influence the effectiveness of monetary policy in China. The relative empirical research method is relatively simple, which cannot describe the influence of international capital flow under the dimension of time on the effectiveness of monetary policy. In this paper, the analysis helps to grasp the current monetary policy to regulate and control the difficulties and shortcomings, which has a certain theoretical and practical value, this paper also has some shortcomings, such as lack of international capital flow in the micro perspective, a further quantitative analysis of the impact of monetary policy transmission channel effect.This paper analyzes the mechanism of the influence of international capital flow on the effectiveness of monetary policy, and sets up a simple economic system, using the TVP-VAR model from the perspective of the time-varying effects of international capital flows and short-term capital flows on the effectiveness of monetary policy, to overcome the limitations of the general VAR model. And on this basis we establish a fixed offset model, in the long-term and short-term capital flows included, to measure the degree of influence of international capital flow on the effectiveness of monetary policy to offset the offset coefficient, coefficient is high, which stress the extent of international capital flow on the effectiveness of monetary policy. Finally, the international short-term capital flows and long-term capital flow offset to the monetary policy factor have been obtained through the model, and we apply the recursive coefficient method to estimate the dynamic process of the offset coefficient change.The key conclusions of this paper:firstly, the impact of international capital flow on the money supply in the short term is positive., and its effects on money supply are still positive, but there has been a downward trend. Secondly, the impact of short-term capital flow has been more significant, and the influence is positive. The effect of international capital flow on the price and money supply are similar. At last, long-term capital flow offset coefficient is -0.1093, the short-term capital flow offset coefficient is-0.5883; from 2003 to 2005 the offset coefficient of long-term capital flow are showing an upward trend. In 2005 the offset coefficient of long-term capital flows and decreased slowly, and the change amplitude was relatively small. From 2003 to 2014, the offset coefficient of short-term capital flow had been a rising trend, which fluctuated violently.