Study On The Shock Effects Of The Divergence Of Monetary Policies Between China And The United States On The Macroeconomy

During the epidemic in order to vigorously stimulate the economy,the United States implemented an unlimited quantitative easing policy,making the original trend of high inflation in the United States prices continue to rise,and now in order to suppress high inflation to stabilize prices the Federal Reserve will change its policy direction to use tight monetary policy.Since the beginning of this year,the Federal Reserve has raised interest rates several times and will continue to keep raising interest rates before reaching the purpose of suppressing inflation.Today’s global economic integration is highly developed,a country’s monetary policy adjustments will often affect other countries’ economies internationally through channels such as interest rates and exchange rates.Due to the size of the U.S.economy and the strong position of the U.S.dollar,the Fed’s interest rate hikes have had a significant impact on the economies of countries around the world.China,as the largest developing country,has seen its economy grow and its international status improve significantly in recent years,and because of the close economic ties between China and the U.S.,monetary policy adjustments by both have an impact on the economic output and financial markets of both each other and the rest of the world.In the past,other countries would often adopt the same monetary policy measures to counteract the impact of the U.S.interest rate hike,but currently China has chosen to adopt a prudent "us-based" monetary policy to support its economic development.At present,there are few studies on the U.S.interest rate hike and the divergence of monetary policy between China and the U.S.,especially on the spillover of monetary policy from the U.S.but less on the two-way spillover of monetary policy between China and the U.S.This paper will analyze the spillover effects and specific transmission channels of monetary policy divergence between China and the US through TVP-VAR model,which provide theoretical basis for China to formulate targeted policies in this regard.Firstly,this paper reviews domestic and foreign literature on monetary policy spillovers and international transmission,and focuses on the research content of the mutual influence of Chinese and American monetary policies.Secondly,in the part of theoretical analysis,it analyzes the reasons why the two countries choose different monetary policies from the differences of macroeconomic structure and financial market development,as well as the differences of the purpose,means and transmission mechanism of monetary policies.According to MFD model,this paper provides a theoretical basis for further research.This paper makes a theoretical analysis of the international transmission of monetary policy divergence between China and the United States from two aspects: capital channel and trade channel.Finally in the empirical part,the establishment of TVP-VAR model,the monetary policy of China and the United States the differentiation of the result of the macroeconomic impact of the two countries in impulse response analysis,and draw the following conclusion: the differentiation of monetary policy of China and the United States dollar relative to the appreciation of the renminbi,but the impact duration is shorter,in recent years,the reaction of the exchange rate for the spread of change is more significant.The impact of exchange rate rise on China’s total output will be temporarily positive and then back to negative,but the impact is less than the impact of exchange rate itself by monetary policy divergence,and the total output will be affected by exchange rate fluctuations for a longer time.China’s foreign direct investment is negatively affected in the short term,but China’s stable medium-and long-term investment value can alleviate the capital outflow caused by short-term speculative demand.During this period of currency divergence between China and the United States,the role of foreign direct investment in promoting China’s total output has increased.The divergence of monetary policies between China and the United States is conducive to the growth of China’s export.In recent years,the promotion effect of export on China’s total output level has increased,and the relationship between export and total output is more direct.The appreciation of the dollar is conducive to promoting the level of the total output of the United States.The promoting effect of the appreciation of the dollar on the total output of the United States after the divergence of the monetary policies between China and the United States is much lower than that in the previous two periods.After the divergence of monetary policies between China and the United States,the foreign direct investment in the United States presents a stable positive impulse response.The interest rate increase is significantly stable for the attraction of international capital,but the final positive effect reflected in the level of total output is limited.After the divergence of monetary policies between China and the United States,the export of the United States is more negatively impacted,and the negative impact of export decline on the total output has also increased.According to the empirical results,this paper puts forward some targeted policy suggestions in the last part: First,promote the internationalization of RMB and enhance the international status of RMB.Effectively improving the stability of the RMB value is conducive to weakening the impact of the Fed’s interest rate hike on the exchange rate.Second,we adhered to a prudent monetary policy to promote steady growth of the domestic economy.Domestic economic strength is the key to the stability of the value of RMB.We should adhere to the implementation of prudent monetary policy,pay attention to our own economic development,strengthen the coordination between monetary policy and fiscal policy,and promote the upgrading of industrial structure.Third,attach importance to the dual circulation of domestic and foreign countries to stimulate the potential of the domestic consumer market.We must not only attach importance to the promoting role of foreign trade to our country’s economy,but also focus on the expansion of domestic market.