American monetary policy coordination mode empirical research
|Keywords||international monetary policy coordination independence of monetary policy making monetary policy conflict business cycle investment demand counter-productive effect monetary policy hit the exchange rate of RMB two-country model Granger causality SVAR model HP filter|
The violent dispute over the exchange rate of RMB doesn’t only reflect the conflict of a particular time.With China’s rise as a global power,the trend is emerging that China and US will impose ever greater spill-over effects on each other.Therefore,the two power’s response functions to monetary policy will be greatly changed and a potential conflict of economy structure will turn to be a lasting conflict of monetary policy.By analyzing the model of the coordination of international monetary policy between China and US and establishing China’s Loss function of monetary coordination,we demonstrate the impact of US’ monetary policy hit on China’s macro- economy and the structural conflict of economy operation of the two nations using econometric methods. What we have done is to prove that the Sino-US monetary policy coordination is not consistent and China’s monetary policy is destined to be independent. The result shows that as China rises,Sino-US monetary policy coordination is facing great challenge:the ongoing coordination model subjects China’s economic development to the turbulence of US’ monetary policy,the Loss function is deteriorating and the important instrument of monetary policy is facing the risk of default.China’s unique investment-oriented demand model makes it crucial for the nation’s independence of monetary policy making. Perfecting the mechanism of exchange rate formation and promoting the establishment of fair and reasonable rules for international monetary cooperation are the premises for that and also the best choice to handle Sino-US monetary policy conflict and steer away from risks for economic development.