Empirical research on the international spillover effects of U.S. monetary policy and their impacts

WU Hong(吴宏)1、 2 and LIU Wei(刘威)1
1Economic Development Research Center of Wuhan University
2Zhejiang University of Finance & Economics

Abstract:
Empirical research has shown that there were international spillover effects from the U.S. monetary policy to output
level, net exports and price levels of each country, and the impact on prices in each country was of synchronous effect. The structural impulse response analysis showed that U.S. monetary policy could improve U.S. income and payment without damaging U.S. economic growth, but the shocks negatively affected the economic growth in the rest of the world. Hence, it’s important to pay close attention to the moral risks of U.S. monetary policy to evade the global shocks caused by the “benefit-itself-at-the-expense-of-others” polices of the American government. Besides these findings, U.S. monetary policy shocks strongly affect China’s trade surplus fluctuations. Based on this, we propose that the approaches of balancing China’s current account could be explored efficiently from the perspective of monetary policy.
Keywords:
monetary policy, spillover effects, synchronous effect, structural vector auto-regression

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