The External Impact of Developed Economies Monetary Policy on China’s Systemic Financial Risks

The External Impact of Developed Economies Monetary Policy on China’s Systemic Financial Risks


Author:Qiao Mu-zi,Song Yu-chen Journal:Economic Review Date:2018(03)

Abstract: This paper examines the external shock effects of the monetary policy of developed economies-the United States,the European Union,and Japan on China ‘s systemic financial risks It uses the SV- TVP-VAR model with stochastic fluctuation to build the impulse response function,which use China’s systemic financial risk index,interest rate and exchange rate (dollars,euro and yen) as variables,analyzing its time-varying features and the response mechanism.The empirical results show that the monetary policy of the USA the European Unions and Japan has varying impact on China  s financial market stabilization.The interest rate spreads between China and the developed countries and the expectation of RMB appreciating will both lead to quantities of cross border capital flowing to China and increasing the possibility of systemic financial risk happened.As a result,China must be precaution of the risks bringing by other countries monetary policy,strengthening the supervision of cross-border capital flows,and improving the financial regulatory system to maintain the stabilization of financial market.

Key words: Developed Countries; Monetary Policy; Systemic Financial Risk

 

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