Financial Cycle Dependence of Monetary and Exchange Rate Policies in an Open Economy

The deepening of globalization has posed challenges to open economies, such as fluctuations in international capital flows and intensified cross-border risk contagion. To explore the impact mechanism of FC on MP and ERP, this paper adopts TVP-VAR, MS-VAR, and MS-DSGE models, and introduces the SVR model as an auxiliary prediction tool to analyze policy dependency characteristics through standardization and periodic decomposition. The results showed that during the 2008 financial crisis, the growth rate of the broad money supply reached 17.0%-20.0%, the Shanghai Interbank Offered Rate rose to 3.6%-5.2%, and the asset price volatility exceeded 20%. During the COVID-19 pandemic in 2020, the volatility of real estate prices reached 7.2%-9.5%. In terms of policy transmission, the impact of asset price shocks on the consumer price index significantly increased after 3 months and reached its peak after 6 months. The regulatory coefficient of interest rate policy on the financial condition index under the high volatility regime was 1.1862, and the response coefficient of the growth rate of the broad money supply to the output gap under the low volatility regime was 0.2156. The SVR model had a prediction accuracy (R² of 0.85) for the impact of MP on ERVs, especially in capturing nonlinear relationships during financial expansion periods. This achievement demonstrates the significant effect of FC stages on the effectiveness of MP, providing an FC sensitive policy framework for open economies, helping to enhance macroeconomic resilience and maintain internal and external balance.