International Journal of

Business & Management Studies

ISSN 2694-1430 (Print), ISSN 2694-1449 (Online)
The U.S Monetary Policy Spillover Effect in China and Its Transmission Mechanism


With the rapid development and continuous advancement of economic globalization, the links between countries around the world have become increasingly tight. Among them, the United States, as the world's largest economy, its monetary policy is bound to cause significant spillover effects on other economies around the world. By constructing a Threshold SVAR model with monthly data from 1996 to 2019, this paper empirically investigates the spillover effects of US monetary policy on China's economy during different U.S policy regimes. The transmission mechanism of such effects has been examed through different channels including policy channel, trade channel, asset value channel and information channel. The estimated threshold values of the Fed Fund rates/Shadow rates are between 0.905-0.990, which coincides with the unconventional policy period of U.S monetary policy. Also, the responses of different channels to U.S. monetary shocks in the lower regime(unconventional time) are different from those responses in the upper regime(conventional time).