The Effects And Transmission Mechanism Of The US Quantitative Easing Monetary Policy

In 2008,the financial crisis originated in the United States has frustrated the U.S.and the world`s economy.But when the crisis happened,the fed's federal funds rate had already fallen into nearly zero point,so the traditional monetary policy is invalid.To cope with the situation,the fed implemented the quantitative easing monetary policy(QE)---the federal reserve system's large-scale asset purchases to provide a sufficient liquidity to the market.This paper will mainly study the impact of the fed's QE to the US and the rest of the world.The main goal of this article is to enrich the content of our country's macroeconomic regulation by studying QE.Moreover,as one of the America's largest trading partner and debtor nation,our country's interest has been seriously affected by the U.S.monetary policy,so this article will also study the spillover effect of the fed's monetary policy.First,this article studied the domestic transmission mechanism of the QE.Through study the different stages of the transmission mechanism,the paper analyzes both the factors which influence the effectiveness of QE,and the negative impact which QE can bring to a country's economy.Secondly,this article established an Vector Error Correction Model(VECM)to test the effectiveness of QE in the United States.And concluded that the fed's quantitative easing monetary policy is effective.It can decrease the long-term interest rates and improve the output and employment in the United States.But in the short term the quantitative easing monetary policy does not affect the unemployment rate,but in the long-term it does,so there is a significant time-lag effect.And the contribution of QE on the employment and output is small.So QE had to last a long time,which leads to a large fed's balance-sheet,and it's bad for the normalization of the American monetary policy.Next,this paper studies the negative effects of QE to other economies.Because dollar is the world's reserve currency,so the United States' monetary policy affects all the countries around the world.This article will establish a theoretical model and empirical model to illustrate how QE affects other countries' monetary policy.