Macro Economics, Monetary Policy And Bond Market

The interaction between macro economic factors, monetary policy and bond market is an area that has interested monetary and financial economists for a long time. The development of bond market has highly been paid attention to by most countries, especially the Asian countries and the central banks. In 2003, the ASEAN+3 established the Asia Bond Market Initiative (ABMI) and realized that deep, liquid and mature bond markets are effective tools not only in transforming the region large levels of savings into long-term investments, to promote the economic growth and avoid the double mismatch of currencies and maturities; but also in improving the validity of the monetary policy. As a member of the ABMI, China has done a lot on improving bond market in recent years, and bond market has achieved a fundamental change on both the depth and scope. However, as the bond market started late and affected by the environment of indirect financing bigger than direct financing, equity financing preferred than bond financing, there are few literatures on the bond market. In this condition, the dissertation reviews the China bond market, and researches the issues of the interaction between macro economics, monetary policy and bond market, which has a high theoretical value and practical significance.According to the aforementioned, the dissertation, adopting the method of the combination of the theoretical analysis and empirical analysis, the combination of the historic regression and countries comparison, establishes a theoretical framework of the interaction between the macro economics, monetary policy and bond market, base on which it set up a model to do empirical analysis. Finally, the dissertation promotes policy proposals on how to develop bond market and perfect the monetary policy regulation mechanism.The dissertation consists of four parts. In the first part, we draw out the problem and introduce the correlated theories and literature. Based on the concept of the bond market, we describe and analyze macro economics, monetary policy, bond market and interest rate term structure model; also, we analyze the relationship among macro economics, monetary market and interest rate term structure model. In the second part, we introduce the Chinese practice of monetary policy and bond markets emphatically. In the monetary policy practice part, we begin with the open market operation, deposit reserve policy, rediscount policy and other aspects, and focus on how the central bank uses the rate policy, and annotates the policy influence of the monetary policy adjustment to the bond market. In the bond market practice part, we review the development process of China bond market, analyze the China bond market present situation from different angles, and draw inspiration through the analysis of foreign main bond market and East Asia emerging bond market, then propose the existence question and the development path. In the third part, in above the foundation of first part of literature review's enlightenment, referring to the practice overview of the second part, we extract three factors from our inter-bank bond yield curve using the principal component analysis, then we adopt the SVAR model to analyze the influence that macro economics makes to the bond market, the monetary policy makers to the bond market as well as the bond market makes to the macro economics. Finally, on the base of the three main conclusions, we give some opinions to the bond market and monetary policy markers, as well provide a brand-new investment views the bond market participants.The primary contributions of this paper include the following aspects:first, combined the theoretic research at home and abroad, and the practice experience of monetary policy and bond market at home, we conclude the interactive relations between macroeconomic theory, monetary policy and bond market, which supplied a gap in bond market research area. Second, we establish China bond market interest rate term structure through principal component analysis, and use the SVAR model analyze the relationship among the macro economic indicator, the monetary policy parameter and interest rate term structure respectively, seeking for the most superior relational parameter from the real empirical results. Third, on the basis of the conclusions of this paper, we promotes the policy proposal from the aspects of the development orientation of bond market, the monetary policy marker and the bond market investors, which will benefit the authorities to make policies.