Research on the Monetary Policy Coordination between China and the US
|Keywords||Monetary policy coordination Spillovers Coordination mechanisms Exchange rate target zone|
In the review of the relevant literature, based on the integrated use of this method of theoretical analysis and empirical analysis on China and the U.S. monetary policy coordination for a more comprehensive study. This article mainly answer five questions (1) why the two countries to study monetary policy coordination? (2) the impact of Sino-US two-way monetary policy spillovers exists? (3) China and the U.S. monetary policy coordination can produce Revenue? (4) What kind of program is suitable for both countries monetary policy coordination? (5) This paper analyzes what kind of policy recommendations? Firstly, a systematic review of monetary policy coordination theoretical literature, based on the existing literature examines the spillover effects of monetary policy and monetary policy coordination analytical framework. In an open economy spillover effects of monetary policy research mainly along the MFD model and NOEM model and expand. Although the MFD model is simple and straightforward, but the lack of micro-based and only a limited ability to explain and predict, and NOEM model overcomes the defects MFD model and be able to carry out the strict sense of the welfare analysis. Through the MFD model and NOEM model comparison, this paper argues NOEM model is more suitable for analyzing the two countries can be spillover effects of monetary policy analysis and coordination paradigm. Secondly, this paper SVAR model the impact of Sino-US two-way monetary policy spillovers an empirical study. Study found that U.S. monetary policy tightening negative effect on China's output; absorption effect through income and expenditure switching effect of the combined effect will inhibit exports and imports, and ultimately will worsen our trade balance. By variance decomposition shows that U.S. monetary policy tightening negative effect on output than the other three aspects. Chinese expansionary monetary policy will have a positive effect on U.S. output; absorbed through the income effect on the U.S. import demand, while expansionary monetary policy makes the currency devaluation pressure on expenditure switching effect through lower import demand from the United States, via two effects of the combined effects of net exports to the U.S. have a negative effect. By variance decomposition shows that compared to other three variables concerned, China's monetary policy on the U.S. net exports a greater impact. Again, this paper NOEM analysis paradigm for monetary policy coordination Sino welfare gains are analyzed theoretically. Study found that when the two products, the elasticity of demand greater than 1 and the two labor supply shocks correlation coefficient is less than 1, the monetary policy coordination to the potential welfare gains; when the elasticity of demand for the two products is equal to one or two labor supply shocks correlation coefficient is equal to 1, the monetary policy coordination potential welfare gains to zero; if you want to use two tight monetary policy to improve the country's welfare level, monetary policy co-ordination between the two countries has a solution to the instability. Finally, this paper analyzes the Sino-US monetary policy coordination scheme selection. Studies have shown that a policy based on a coordinated manner, the International Monetary Policy Coordination two mechanisms: the camera of coordination and regularity coordination. In the current conditions, the Sino-US coordination mechanism of monetary policy choice is the camera coordinate. Coordination in the choice of the camera while the comprehensive consideration of the stability and flexibility of coordination on the basis of this scheme is that the exchange rate target zone a more appropriate choice. The exchange rate target zone program is the core content of the first basic measure equilibrium exchange rate, which is determined by the width of the target regions as an important basis for the appropriateness. In this paper, Ai Erba Dawei (Elbadawi, 1994) proposed the equilibrium exchange rate model for developing countries, according to the RMB exchange rate fluctuations and domestic macroeconomic situation, monetary policy coordination that Sino-US exchange rate floating range of the upper and lower target zone can be set to 15%.