Research On The Economic Spillover Effect Of China's Monetary Policy On Countries Or Regions Along The Belt And Road Initiative

After the 19th National Congress,socialism with Chinese characteristics entered a new era,and China also entered the period of reform.It is a realistic development challenge to maintain an independent monetary policy and to minimize the negative external spillover of monetary policy to relevant countries.This paper uses the two-block FAVAR model to analyze the spillover conduction of China's expansionary monetary policy shocks to macroeconomic variables in countries along the "Belt and Road".The analysis is based on a data set of 71 countries along the "Belt and Road" from December 2003 to October 2018,including real economic variables,financial variables and world variables.In addition,this paper analyzes the channel mechanism of spillover effects,and further discusses the impact of channel efficiency and institutional arrangements on the heterogeneity of China's monetary policy on the foreign economy of countries along the line.Under the expansionary impact of China's monetary policy,it will promote the import and export of most countries along the "Belt and Road",increase output,prosperous investment along the country,stock market boom,inflation pressure doubled,showing the spillover effect of China's monetary policy "locomotive".The increase in output is driven by China's additional consumer demand,and the impact of the country's output with closer trade links is more pronounced.The impact of short-term interest rates in countries along the line is heterogeneous and closely related to the lack of credit channels.The free exchange of Chinese capital proj ects has not been fully liberalized,and there are certain restrictions on direct foreign investment and credit,making the supply of credit to the economies along the line actually insufficient.One-way credit demand has soared,and it is easy to raise short-term interest rates in the economies along the Belt and Road.In countries with closer financial links,credit channels are more fluent,and the rise in short-term interest rates has been effectively alleviated.In addition,the national output of the floating exchange rate system along the line has dropped significantly.Countries that implement bilateral currency swaps with China can effectively mitigate the negative impact of output.After the announcement of the "Belt and Road Initiative" initiative in 2013,China strengthened its trade and financial links with countries along the route.This study provides an empirical basis for China to formulate monetary policy as a responsible big country.The policy recommendations in this paper are to establish and improve the "monetary policy+macro-prudential" dual-pillar financial regulation system;adhere to the "Belt and Road Initiative" initiative,adhere to cooperation and win-win;continuously deepen the financial policy cooperation along the "Belt and Road" countries,and actively control and balance Spillover effect;promote the free exchange of RMB capital projects and strengthen the international confidence of the RMB.