The Spillover Effect Of US Monetary Policy Uncertainty On Emerging Economic Countries

Because of the unique status of the United States and the United States dollar in the global economy,the changes of American monetary policy have a significant spillover effect all over the world.Especially since the subprime crisis in 2007,American monetary policy has attracted more and more attention all over the world.During the process of quantitative easing and withdrawal in the United States,the frequent manipulation and capriciousness of monetary policy made countries all over the world have to bear the impact of the uncertainty of American monetary policy.Summarizing the previous papers,we can find that the transmission channels of US monetary policy uncertainty include exchange rate expectation,financial asset allocation,transmission of monetary policy uncertainty,and real option effect.There are differences in spillover effects between different countries.Among them,exchange rate expectation,financial asset allocation and monetary policy uncertainty contagion channel react sensitively and rapidly,whereas real option effect has a slow and long-term impact on the real economy.In this paper,the US monetary policy uncertainty index compiled by Baker in 2017 is used as the proxy variable of US monetary policy uncertainty.The spillover effect of US monetary policy uncertainty to 27 emerging economies including China is studied by using the PVAR model,and the heterogeneity is analyzed.The empirical results show that when the uncertainty of U.S.monetary policy increases,the exchange rates of emerging economies fluctuate significantly,the stock market shows a significant decline,and there is a significant imbalance in cross-border capital flows.At the same time,domestic interest rates are also affected by the uncertainty of U.S.monetary policy,causing certain disturbances to the real economy.Further research finds that countries with close trade ties with the United States have stronger immunity to capital markets due to the relatively stable supply and demand of the United States,but the uncertainty of the real economy is higher.Capital control could effectively restrain the large flow of transnational capital,releasing better freedom for their own monetary policy and improving the resilience to the uncertainty of US monetary policy.Countries with good financial development are more immune to the uncertainty of US monetary policy because of lower market risk,leading less volatility and stronger attraction for foreign investment when they are exposed to the impact of uncertainty:in US monetary policy.But the real economy is also more vulnerable to short-term shocks.