The Research On The Spillover Effects Of QE Policy In The US,Japan And Euro Area On Capital Flows In China

Since the global financial crisis in 2008,the three largest economies,the US,Japan and Euro area,have implemented large-scale quantitative easing(QE)policy within the constraint of policy interest rate approaching zero to deal with financial market turbulence and economic recession.The implementation of QE policy in developed economies has promoted the economic recovery,but at the same time has produced significant spillover effects on other countries,especially the emerging economies through various channels.On the one hand,the implementation and withdrawal of the QE policy increase the fluctuation of the international capital flows in China.On the other hand,the QE policy affects the exchange rate and the stock market through the international capital flow channel,which threatens the financial stability.With a turbulent international economic environment,the threat of large and frequent fluctuations of international capital flows to China's economy will exist for a long time.Therefore,studying the influence mechanism and spillover effects of QE policy on China's international capital flows,and implementing effective international capital flow management have become urgent issues in China.Based on the above facts,this paper studies the impact of QE policy on capital flows in China using both theoretical and empirical analysis.First,we analyze the related theories,concepts and the channels that QE affects capital flows,which lays a foundation for the following empirical analysis.Second,the empirical study includes two parts.The first part compares the impact of QE policy in the US,Japan and Euro area on Chinese capital flows,tests the channels that QE affects capital flows and explores the overall effects of the QE policy in three developed economies based on the vector autoregressive model(VAR).The second part investigates the dynamic impact of QE policy by different advanced economies in different periods on Chinese capital flows as well as the overall time-varying effects during ?implementation-quit-differentiation? periods using rolling regression model.The results show that QE policy significantly affects Chinese capital flows through liquidity,signaling and confidence channels.According to impulse response,the spillover effects of QE policy in US,Japan and Euro area are different.Specifically,QE policy in US has a positive effect on capital flows after a negative effect.QE policy in Japan increases the volatility of international capital flows in China and the impact of QE policy in the Euro area is limited.The results of variance decomposition show that the short-term interest rate,VIX and real exchange rate have the highest explanatory power to the changes of international capital flow in China.In addition,from an overall perspective,the implementation of QE policy has two positive shocks and one negative shock on China's international capital flows and the positive shocks are more significant.After the US quits the QE policy,the overall impact has reduced quickly and further turned to be negative after the monetary policy differentiation.Therefore,China needs to pay close attention to the monetary policy changes in developed economies and further improve the international capital flow management.