TITLE:
Beggar-Thy-Neighbor? The Spillover Effect of EMU Nominal Negative Interest Rate Policy on China’s Monetary Policy
AUTHORS:
Lisha Zuo
KEYWORDS:
EMU Nominal Negative Interest Rate Policy, Spillovers, China’s Monetary Policy, Two-Tier System, LT-TVP-VAR
JOURNAL NAME:
Journal of Mathematical Finance,
Vol.12 No.4,
November
11,
2022
ABSTRACT: We estimate international spillover effects of EMU nominal negative interest rate policy (NIRP) on China’s Monetary Policy. Using a LT-TVP-VAR we find that an expansionary EMU shock has short-term effects on Chinese financial basic variables and final targets. It leads to a Euro exchange rate depreciation, Chinese interest rate’ rise and decrease of Chinese output, while other variables’ responses are not stable. NIRP in the Euro zone has the negative spillover effects on Chinese monetary policy mainly because of expenditure switching effect of trade channel.