The Transmission Mechanism Of Federal Reserve's Monetary Policy To China's Stock Market

As the world's largest economy that leads the international currency,America's monetary policy and the variation of the scale and value of the dollar has significant influence to all the other open economy.And with China's rising economic power,the world economy has changed.China's rising position,the growing influence and voice,drive the connections with other economy,especially the United States economic increasingly more close.The changes in U.S.monetary policy inevitably have a significant impact on China's output,inflation,employment,balance of payments and other macroeconomic.While the financial market represented by stock market is considered to be the "barometer" of the real economy.Therefore,revealing the effects of the fed's monetary policy transmission to the financial market in China not only meets the needs of the development of China's monetary and financial theory,but also the deep call of China's financial development.This paper studies the transmission mechanism of China's stock market by the Federal Reserve monetary policy,and compares the transductions through the real economy,the cross-border capital flow and the Sino-US stock market channels,and then analyzes its mechanism.Which is different from other studies on the real economy and inflation,the object of study reflects the perspective of innovation.First of all,this article intuitively depicts the implementation of the Federal Reserve monetary policy and its impact on China's economy,so as to obtain the overall effect of the Fed's monetary policy spillover effect.In this paper,there are three theoretical supports that the two countries Mundell-Fleming model,speculative money demand theory and the stock market linkage mechanism,so as to extract the role of the three channels for empirical testing.Secondly,this article uses the Granger causality test and the structural vector autoregressive(SVAR)model,and points out that the Federal Reserve monetary policy can be identified by the federal funds rate and M2 as the proxy variable.And then add the real economy,cross-border capital flows and Sino-US stock market channel variables to the model for empirical testing.We find that in the real economic channels,the impact from the federal funds interest rate is greater,and in the other two channels,M2 brings a larger impact.Horizontal comparison,the Sino-US stock market channel has the largest influence,cross-border capital flow channel followed,and the real economic channel is weak.Thirdly,using the variance decomposition of the corresponding model to study the transmission of the three channel variables to the Chinese stock market,the Sino-US stock market channel is the most important,followed by the real economic channel,and the cross-border capital flow channel is not smooth enough.To sum up,in the transmission paths of the Federal Reserve monetary policy on the Chinese stock market,the Sino-US stock market channel plays an important role,which is consistent with the results of Granger causality test.Finally,after combining empirical analysis conclusion,this paper proposes some policy recommendations to the government,the central bank and other relevant regulatory,and also give the follow-up research prospects at the end of the full text summary.