Study On The Spillover Effects Of U.S. Monetary Policy On China's Stock Market

Under the background of global economic integration,inter regional economic linkage is gradually increasing,and the policy spillover among countries is prominent.As the anchor of the global economy,U.S.monetary policy orientation has an important impact on other economies,including China.The Federal Reserve restarted the interest rate cycle in 2015,international capital began to return,which is bound to bring about a certain impact on the real economy and capital markets in emerging economies.Particularly,this conduction could deliver a heavier burden on those countries with limted foreign exchange reserves and high-related foreign investment circumstance.Firstly,this paper reviews the relevant theories and empirical results of the impact of monetary policy on the stock market and policy spillovers,and then analyzes the impact of U.S.monetary policy on China and the spillover path.And it discusses some econometric framework,including the Directed Acyclic Graph,SVAR model and Factor Augmented Vector Autoregressive model,etc.On this basis,we use the macro and micro data of China and the United States to study the spillover effects of monetary policy,in order to explore whether the U.S.monetary policy has an important impact on China's stock market,and demonstrate the effectiveness of the spillover path.The empirical results show that: the U.S.monetary policy has a significant spillover effect on China's stock market.From the perspective of returns,there is a one-way contemporaneous causality between U.S.monetary policy and stock market returns in China.In the short term,Quantitative easing monetary policy in the United States has positive and negative influences alternately on China's stock market,in the long term there is a positive spillover;however,there was a lag impact of U.S.tight price-based monetary policy on China's stock market,which has a negative effect in the short term,the long-term spillover effect is positive significantly.From the perspective of volatility,Quantitative easing monetary policy in the United Statesshows a negative spillover effect,that is to say,it can reduce the volatility of China's stock market;while the tightening price-based monetary policy generally shows a positive spillover effect,and the impact is significantly greater than the former.The study also found that the U.S.monetary policy also has a significant spillover effect on China's monetary policy,exchange rate,foreign exchange reserves and investor sentiment.When the United States adopted a loose monetary policy,it will improve the domestic investor sentiment and increase the pressure of RMB appreciation.At the same time it can increase China's foreign exchange reserves,and ultimately interfere with China's policy independence,force China to put liquidity into the market.In addition,the main channel for the spillover on stock market returns in China is the stock market channel,the stock market in China and the United States has a strong linkage;followed by the investor sentiment channel;the exchange rate and monetary policy channels are the last.For the spillover on volatility,the main conduction path is the investor sentiment channel,followed by the stock market channel,and finally are the exchange rate and monetary policy channels.