Monetary Policy Uncertainty and China’s Consumption Industry: Evidence from Fed’s Rate Hike

Abstract

This paper focuses on the fact that what will China's consumption look like under the influence of Fed’s rate hike. Before finding out the result, the background of the Fed’s rate hike and China's consumption, and the role of the raising interest rate will be introduced. And then, two data series will be used, which are USD/CNY exchange rate and consumer industry index. After that, based on two data series, two models, namely VAR model and ARMA-GARCH model will be built in order to observe these two data series. However, it is also necessary to check the stability of two data series and two models. In addition, the results of models will be discussed, analyzing how Chinese consumption is influenced by Fed rate hike. At the end of this article, advice will be given for the policymakers to deal with the situation of Fed’s rate hike. Hopefully, this article can give some advice and help to policymakers and investors.