Research On The Effectiveness Of China's Monetary Policy Under The Open Economy

In the context of current world economic integration and trade liberalization,international capital has become an indispensable driving force for domestic economic development and financial innovation.In recent years,the speed of international capital flows has been accelerating,the scale and scope have been expanding,the variety has been increasing.Due to the political factors of the United States and Britain and other countries,the direction has also begun to reverse,showing the characteristics of liberalization and diversification.As an emerging market country,China is more vulnerable to the abnormal fluctuation of international capital flows,which brings new challenges to China's financial factor pricing,capital system stability and internal and external risk prevention,especially bring more pressure on monetary policy system.In this context,based on the analysis of the characteristics and new trends of international capital flows,this paper explores the effectiveness of China's monetary policy under the open economy,and draws the degree of offset of international capital flows on monetary policy.This may have certain practical and theoretical significance on improving the effectiveness of China's monetary policy and preventing macroeconomic risks.This paper reviews in detail the basic theories of international capital flows and the effectiveness of monetary policy,focusing on the Mundell-Fleming model and the“ternary paradox” and its extension.The characteristics of the composition and emerging trends are analyzed by using the latest data to analyze the international capital flows.It is concluded that China will maintain its position as a net exporter of capital for a long period of time;foreign financial investment and foreign direct investment will go hand in hand;FDI inflows will decline relatively,and financial capital inflows will be relatively rising;official capital inflows rise and output declines,private capital inflows decline and output rises.Then from the theoretical point of view,it analyzes the influence mechanism of international capital flow on the intermediate target,transmission mechanism and ultimate goal of monetary policy,and analyzes the path of international capital flow to monetary policy variables.In the empirical part,after quantifying the relevant data from January 2002 to December 2017 in China,a six-variable VAR model was established to visually reflect the impact of international capital flows on various target variables of monetary policy.A modified offset coefficient model is established to determine the degree of offsetting the effect ofinternational capital flows on monetary policy,and compare it with the co-integration equation derived from the VAR model.After theoretical and empirical analysis,it is concluded that China's international capital flows offset the effect of monetary policy by about 32.56%.International capital flows will have a positive impact on domestic output,nominal exchange rate,price and money supply,a negative impact on interest rates.This is consistent with the theoretical analysis.The treasury measures adopted by China's central bank are effective but insufficient,and international capital flows have a significant impact on the effects of monetary policy.According to the results of theoretical and empirical analysis,this paper puts forward the reference suggestions for enhancing the effect of China's monetary policy in the context of international capital flows: expanding the floating range of RMB exchange rate and increasing exchange rate flexibility;flexibly using multiple monetary policy reversal tools to improve the efficiency of reversal;establishing and improving the monitoring and management of international capital flows,rationally using overseas capital to promote the stable and healthy development of China's macro-economy;improving the efficiency of policy transmission of monetary functions to better play the effectiveness of monetary policy.