The Spillover Effect Of The Federal Fund Rate Raising On Sino-US Trade

On December 17,2015,the Federal Reserve Open Market Committee decided to raise the target interest rate of the U.S.federal funds from 0-0.25%to 0.25%-0.5%by 25 basis points,this is the first time the Federal Reserve has raised interest rate in the past decades.The quantitative easing policy which is implemented during the international financial crisis was changed to a normalized monetary policy based on interest rate adjustment.from expansionary monetary policy to tightening monetary policy.In the following year,the market continued to expect the Fed would raise interest rate.However,the Fed's actions slower than market expectations.It was not until December.2016 that the Fed raise interest rate again.In march.2017,the Fed announced to raise interest rate by 25 basis one more time and expected to raise twice more in 2017.In June and December,the Fed announced separately that the target range of federal fund rate would raise by 25 basis.In March 2018.the Fed raised interest rate to 1.5%-1.75%.This is the first interest rate adjustment policy since Powell took office,this is also the sixth interest rate increase after the start of this raise round.It is expected that there will be two more interest rate increase in 2018.showing good cofidence in the future economic trend of the U.S.After the Federal Reserve announced a rate hike in March 2018.the US dollar index expanded and the US stock index closed slightly lower.As the world's superpower,the U.S.currency has performed international settlement function for a long time.Changes in the exchange rate of the U.S.dollar will inevitably change the flow of international capital and affect other countries' short-term output levels,exchange rates,interest rates,and commodity prices,and furtherly has a huge impact on the economic development as well as the fomulation of monetary policy.The Fed's rate hike cycle over the years has caused a lot of impact on the economic development of its trading partner countries,such as the Asian financial crisis in 1997 and the global financial crisis in 2008.With the continuous deepening of economic integration,the impact of changes in the monetary policy of the Federal Reserve on the rest of the world continues to expand.After the Federal Reserve announced an interest rate hike,the world's other economies decede to tighten the monetary policy to reduce the inflation risk.China's openness continues to increase since China accessed to WTO,and has established an important trade partnership with the United States.As the world's largest developing country and the largest developed country,China and the United States are the two most important economies in the world.The economic development of China and the United States and the trade changes between them will not only have a far-reaching impact on the economic and social development of the two countries,but will also lead to changes in the economic development of other countries.In April,2018,the United States announced that it intends to increase tariffs on some China's commodities.The Sino-U.S.trade development relations have once again attracted attention from the world.The US taxation act violates WTO trade standards and also has a serious impact on the economic development of countries around the world.Therefore.this paper which studies the Federal Fund Rate hike will affect the Sino-trade development and how to promote the development of trade with the United States has a very important practical significance.The first part of the paper mainly introduces the background of the topic,theoretical basis,research methods,innovation and deficiencies.The second part is an overview of the Fed's interest rate hike cycle and related theories.The third part is the theoretical analysis of the Fed's interest rate hikes on Sino-US trade.The fourth part is an empirical analysis of the impact of the Fed's interest rate hike on China's foreign trade.This paper uses the vector autoregressive model VAR to conduct an empirical.Finally,according to the above results,some suggestions on promoting the development of trade with the United States under the background of raising interest rates are proposed.