Spillover effects of Japanese monetary policy on China: Is there any differences during and aftermath of crisis?

Abstract

This paper examines the spillover effects of Japanese monetary policy on Chinese macro economy - during and in the aftermath of 2007-2008 financial crisis. Study periods are divided into two: from January 2007 to January 2013 as the first period and from April 2013 to December 2015 as the second one. The reason why we take 2013 as threshold is that since 2013, Japan executed more radical quantitative easing policy and China experienced an obvious slow economic growth and deepen market oriented interest rate reform and exchange rate reform. The results of VAR model analysis shows that Japanese monetary policy did have spillover effects on China economy, while behavior of two stages were different. Japanese monetary policy mainly affected Chinese money supply, exchange rates and interest rates at the first stage, while it mainly affected Chinese output and trade level at the second stage.