Impact of U.S. Monetary Policy Adjustments on China's Economy

Liu Weiping ()
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Liu Weiping: China Development Bank

Chapter Chapter 6 in American Monetary Policy Adjustment and Its Impacts, 2023, pp 171-200 from Springer

Abstract: Abstract By using a combination of the VAR model and the event studyevent studies method to systematically study the impact of U.S. monetary policyU.S. monetary policy adjustments on China's economy in the post-financial crisis period based on the three aspects of conventional U.S. monetary policy, U.S. quantitative easingquantitative easing (QE) policy and U.S. monetary policyU.S. monetary policy adjustments in the context of the COVID-19 pandemic, we can find that: An increase in the federal funds rate had a strong positive spillover effectspillover effects on China’s economy in the quantitative easing policy interval, and a negative effect in the monetary policy normalizationmonetary policy normalization interval; the implementation of U.S. quantitative easing policy had a significant negative spillover effect on China's macroeconomymacro economy as a whole, manifested as a beggar-thy-neighbor effectbeggar-thy-neighbor effect; in the context of the COVID-19 pandemic, the Fed's zero interest rate policyzero interest rate policy had a more extensive and significant impact on China's stock market, bond market and foreign exchange market than emergency rate cutsemergency rate cut and unlimited quantitative easingunlimited quantitative easing, and ultimately led to a complex situation where China's stock market fell across the board, China's bond market was down, and the RMB depreciated against the U.S. dollar.

Date: 2023
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DOI: 10.1007/978-981-99-7810-6_6

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