Research On The Spillover Effect Of Fed’s Quantitative Easing Policy On Chinese Stock Market

With the global outbreak of the COVID-19 in 2020,the United States once again entered the era of quantitative easing: in March 2020,the Federal Reserve launched a$700billion purchase of medium-and long-term bonds,and then announced the implementation of unlimited quantitative easing.Previous studies have shown that as the world’s largest economy,the adjustment of monetary policy in the United States often has an impact on the economies of other countries,and is transmitted to the capital markets of other countries through relevant economic indicators such as interest rate and exchange rate.Based on the status of the United States and the US dollar in the global economy,the continuous reform and development of Chinese stock market and the acceleration of internationalization in recent years,what kind of spillover effect the Fed’s quantitative easing will have on China’s stock market and through what economic channels will be of practical significance.Therefore,this paper first collates the empirical research on the spillover effect of the Federal Reserve’s monetary policy and related channels,and selects four economic variables: exchange rate,foreign trade,psychological expectation and interest rate as the channel variables to be studied;Then it discusses the transmission of the spillover effect of a country’s monetary policy as well as the mechanism of these four channels;Then it arranges the implementation of the four rounds of quantitative easing policy of the Federal Reserve and the development process of China’s stock market,and analyzes the current situation of China’s stock market and the selection of economic variables during the implementation of quantitative easing by the Federal Reserve;Then,nine time series of shadow interest rate which can measure the QE policy,Shanghai Composite Index,A-share index,B-share index,H-share index,US dollar to RMB exchange rate,China’s import and export value index difference,consumer confidence index and Shanghai interbank offered rate are selected to construct SVAR model for impulse response analysis.In addition,robustness test is carried out through other SVAR establishment methods;Finally,combined with the theoretical basis,empirical results and the actual situation of our country,this paper puts forward policy suggestions.Impulse response analysis shows that the Fed’s quantitative easing policy will have spillover effects on China’s stock market,and the effects on different stock indexes are heterogeneous: the implementation of quantitative easing can promote the rise of Shanghai Composite Index and A-share index,indicating that it can bring a positive impact on Chinese stock market as a whole;The B-share index will rise first and then fall.H-shares are mainly impacted negatively,but the overall impact is relatively weak,and the spillover effect of B-share and H-share index will gradually tend to zero over time.Among the four selected transmission channels,exchange rate,foreign trade and psychological expectation channels have played a certain role.These three transmission path is relatively complete,but the impulse response result of interest rate channel is not ideal,indicating that there are still some obstacles for quantitative easing to affect China’s stock market through interest rate.