With the financial globalization, the effectiveness of monetary policy is affected by the international short term capital flows. This paper examines the impact of international short term capital flows on the effectiveness of monetary policy in China. The empirical results of Vector auto regression and impulse response function are as follows: money supply, interest rate and the international short term capital flows have a long term stable equilibrium relationship. There is a reverse change relation between interest rates and money supply. The positive impact of international short term capital flows on the effectiveness of monetary policy began to emerge; but the money supply rise brought by the international short term capital flow was written off by national monetary policy regulation, and the write off is too much. Due to restrictions of capital flow in China, the effect of hidden capital flow on the target of monetary policy effect is not obvious. The arbitrage motivation of in and out China international short term capital is not significant, but the relevance of international short term capital flows and interest rates has been very strong. Based on the empirical results, this paper finally puts forward the corresponding countermeasures and suggestions.