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A Research on the Effectivenessand the Influence on China’s Economy of the U.S.Quantitative Easing Monetary Policy

Author ZhouShanLiang
Tutor LuZuo
School Dongbei University of Finance
Course Finance
Keywords quantitative easing monetary policy effectiveness VAR
CLC
Type Master's thesis
Year 2013
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In2008the U.S. financial crisis evolved into a global financial crisis, it have serious impact on the global economy and the United States economy. Represented by the United States, the world’s major economies have introduced various policy measures to cope with the financial crisis. Among them, the United Stateshas been continuously implemented a round of quantitative easing monetary policy to cope with the financial crisissince the outbreak of financial crisis. At the beginning of the crisis, the Fed has taken quick action with a series of conventional monetary policy in an attempt to rescue the U.S. economy.Due to the finance crisis has damaged the transmission mechanism, this kind of traditional monetary policy couldn’t have an immediate effect, the U.S. economy fall into a persistent recession. Against this background, the Fed announced the implementation of the first round of quantitative easing monetary policy at the end of2008, so far, the Fed has announced the implementation of the four rounds of quantitative easing monetary policy. As the world’s largest economy, the U.S. various policy measures taken to revive the economy is useful for us to understand the vane of the world economy; The further study of the response to the financial crisis of United States is useful for us to take an accurate understanding of the quantitative easing monetary policy transmission mechanism and it’s policy effect. In addition, under the background of economic globalization, the United States continues to implement quantitative easing monetary policy will make various influence on the Chinese economy through a variety of channels. Therefore, research the effectiveness of the quantitative easing monetary policy and its influence on the Chinese economy has very important theoretical significance and practical significance.This paper will be divided into five parts:The first chapter:introduction. Mainly introduced this article selected topic background and research significance, literature review and research status at home and abroad, this paper’s main content, framework and methods and so on, The innovations and shortcomings of the paper will be illuminated at last. The second chapter:theoretical analysis of the quantitative easing monetary policy. Firstto define the concept of quantitative easing monetary policy; then discuss the operation and the transmission mechanismof the quantitative easing monetary policy; finally, clarify the difference between the quantitative easing monetary policy and traditional monetary policy from the target, operation mode, transmission channels, operating time four aspects.The third chapter:the quantitative easing monetary policy analysis of the practice of U.S. First reviews theimplementation of four round of quantitative easing monetary policy by the United States since2008combined with background; then systematically combed the innovative monetarypolicy toolsadopted by theU.S. quantitative easing monetary policy; finally, the effectiveness of the quantitative easing monetary policy are analyzed in general.The fourth chapter:the empirical analysis on the effectivenessand the influence on china’s economy of the U.S. quantitative easing policy. The effectiveness and the impact on China’s economy of U.S. quantitative easing policy has carried on the empirical analysis by using the VAR model, the empirical results show that the implementation of quantitative easing reliefobvious effects for the U.S. economy through the effective conduction of exchange ratechannel, medium and long term interest rate channel and signal channels;Quantitative easing can effectively improve the U.S. gross domestic product, improve the level of domestic inflation, but the effect to promote the employment, reducing unemployment is not ideal; In addition, the implementation of quantitative easing will make a positive impact on China’s economic growth and price level through the trade channels, capital flow channel and exchange rate channel; among them, the exchange rate is the main channel.The fifth chapter:conclusion and policy recommendations. This paper argues that in order to reduce America’s continued negative effect brought by the implementation of quantitative easing monetary policy, maintain the steady and rapid growth of Chinese economy, China at present should strengthen the regulation of short-term international capital flows, further promote the RMB exchange rate formation mechanism reform, accelerate the internationalized process of the RMB and strengthen the management of China’s foreign exchange reserve assets.

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