The Study Of Mechanism For Chinese Government Bonds

As the economic crisis swept the whole capitalism world during 1930 s, the Keynesian fiscal policy had been world-wide accepted. Aggressive policy had been followed by greater financial deficit, as well as greater scale of government bonds which had bring a mass of discuss on government bonds’ economic effects. Most popular type of these researches was the comparison between government bond and tax. Recently, European sovereign debt crisis have spread widely through the economic globalization, and have given an ever greater shock to the world’s economy, as well as the ever greater heat of discussions on the issue of government bond’s risk controlling. Some researches focused on the risk signals such as the bonds-production rate, or national debt Government deficit rate. Other researches focus on the economic effects of national debt scale. And there are also quite a number of studies focus on the structure of short-term and long-term debts, the structure of interest rates. In this paper, we will follow the path that from the meaning of studies of national debt theory, to the optimal bonds scale and interest rates, and, finally, the term structure of interest rates behavior in the bond market.First, our efforts focused on the Ricardian Equivalence theorem. In this paper, we checked the basic assumptions, worked out whether the theorem can be proved in the fixed tax policy situation. We established a theoretical model through the intertemporal substitution in consumption. And found out that residents’ propensity to consume is related to bond-production rate, bonds interest rates and tax rate. Then we established the first order of four variables VAR model. Using impulse response analysis, we found out that the bonds issued for residents’ consumption tendency exists obvious positive impact, and the tax rate exists negative impact. Thus demonstrates that the Ricardian Equivalence theorem is not work in China, and the bond has a positive effect on the economy.Next, we put our energy on the issue of optimal bond scale and interest rate under the restrain of government balance. In this paper, we gathered the risk-control and maximize bond’s economic effect in one model. And by reversing the logical path of this model, we worked out the yield-bond-interest model. Based on it, we calculated the optimal bond scale and interest rate of China. During the estimates, we presented a new method for testing the heteroskedasticity. While the model or the economic logic indicates that there is no relationship between the explaining varies and the disturbance, White test is not the right method to test it. By using rolling regression, we had a series of variance. Then test it under the hypothesis that the variance haven’t changed. In fact, we pointed out the heteroskedasticity in this experimental research, used GLS to estimate the coefficient of our model, then carried out the optimal bond scale and interest rate.Finally, by reviewing the econometric models that used in the researches of the term structure of interest rates, we finally adopted more conform to the characteristics of China’s national debt interest rate data, used threshold cointegration model for the empirical study in this paper. Through the empirical study found that in one-month and one-year bonds, for example, there is a very stable relationship between the interest rates, and the threshold effect is significant. It indicated that the threshold cointegration method in the term structure research has good statistical properties and measurement results.According to the conclusion of this paper, on the basis of knowing that bond has a positive impact on economic development, under the premise of risk control, looking for the bond scale and average interest rate as the goal, using short- and long-term bond interest rate’s threshold cointegration relationship as a bridge, under the government’s long-term balanced budget constraint, we can accurately calculate the optimum size of each term bonds to maximize the government bond’s effect of economic development as a means of fiscal policy.