A Dynamic Econometric Study On Term Structure Of Interest Rates And Macro Economy

The term structure of interest rates is the relationship between interest rates or bond yields and different terms or maturities.It reflects the influence of time factors on interest rates,that is,the market's mutual expectation of future interest rate fluctuations under present knowledge and experience.The term structure of interest rates is a simple concept,but it contains a lot of economic implications.It is the foundation of asset risk pricing and risk management,and it is also the key to understanding the internal transmission mechanism of financial markets.It can also help policy authorities to check the effectiveness of policies and grasp market expectations.Therefore,a dynamic econometric study on term structure of interest rates and macro-economy is a very important task in the field of finance and macroeconomics during the “New Nornal” phase.The content of this paper is divided into three parts,the impact of macroeconomic policies on the term structure of interest rates,the dynamic characteristics of the relationship between the term structure of interest rates and macroeconomic factors,and the study of the spread or expectation of interest rate term structures on financial risks and economic cycles.The main research tools are macro-finance model,DSGE model,and empirical models such as TVP-VAR model.The advantage of the macro-finance model is to integrate the macroeconomic and term structure of interest rate.The model has a flexible and open form.The model also can be adjusted and changed according to the analysis needs.First,the paper analyzes the impact of macroeconomic policies on the term structure of interest rates.Macroeconomic policies include monetary and fiscal policies.Firstly,we study the influence of monetary policy on the term structure of interest rate.Based on the shadow interest rate model,we analyze the dynamic response of the overall yield curve and major term structure factors to monetary policy.Then,it examines the effect of fiscal policy on the term structure of interest rates,with a dynamic equilibrium interest rate term structure model containing government spending and debts,and analyzes the impact of the fiscal policy shocks and shock uncertainty on the term structure of interest rates.When the monetary policy changes,the positive shock from short-term interest rates will have a positive effect on the overall structure of the term structure of the interest rate,and the same interest rate shock will also have a positive impact on the term structure factor.At the same time,the shadow rate is a good alternative analytical tool for nominal short-term interest rates during certain periods.The comparison of the impulse response results based on the shadow rate and the nominal short-term interest rate impact on the term structure of interest rates shows that the shadow interest rate represented as a potential monetary policy trend after 2010 is actually lower than the nominal value of short-term interest rates.The ability of monetary policy to adjust the term structure of interest rates may be overestimated.The positive impact of government spending of fiscal policy has a negative impact on the overall yield curves.The impact of government debt has a major positive impact on the term structure of interest rates.In reality,the impact of active fiscal policies on the term structure of interest rates is more complex,and the impact depends on the combined results of the various effects of various fiscal policy tools.The degree of uncertainty in the impact of fiscal policy will affect the response of the term structure of interest rates to the impact of fiscal policy.The increase in the uncertainty of debt impact will lead to an increase in the cost of debt issuance.When the uncertainty of government spending is within a certain range,the overall impact on the term structure of the interest rate is small and the influence is negative.However,when the government spending uncertainty exceeds a certain threshold,it will have a relatively large positive impact on the term structure of interest rates,which will increase the bond yields of various periods,and put pressure on the cost of government spending.This phenomenon shows that the large-scale changes in government revenues and spending in the short term will lead to excessive uncertainty in policy shocks,which will result in failure to achieve the desired policy effect.In addition,the effects of fiscal policy and monetary policy on the term structure of interest rates are not fragmented but joint,and changes in monetary policy rules will affect the impact of fiscal policy on the term structure of interest rates.When studying the impact of fiscal policy on the term structure of interest rates,it is also necessary to consider the corresponding monetary policy environment.Only by comprehensively considering the response of interest rate term structure to economic policies can we obtain more effective anticipatory analysis conclusions.Second,we analyze the dynamic characteristics of the relationship between the term structure of interest rates and macroeconomic factors.This part makes mathematics analysis on the dynamic relation between the term structure components(level,slope,and curvature)and the macroeconomic factor within a FAVAR Macro-Financial model.The term structure components are found to carry information of the macro economy,and can be used to monitor the fluctuation of economy and assist the monetary policy implementation.However,the correlation mechanism is complicated.The mutual impact could persist for a long period.The degree and direction of the interaction will change.Therefore,to achieve the optimal policy effect,the central bank should make policy combined with the whole economy system and choose adaptive operating instruments.Finally,we analyze the spread or expectation of the term structure of interest rates for financial risks and economic cycles.We first study the conduction effect of the term structure of interest rate on macro financial risks.Based on the analysis of the impact of macroeconomic shocks on the term structure of interest rates and financial risks,we examine the expected effects of term structure on financial risks.Then,based on the capital-based macroeconomic cycle theory,we make empirical analysis of the time-varying expected effect of the term structure of interest rates on the economic cycle.The research of the transmission from term structure of interest rates to financial risks shows that macroeconomic shocks have an impact on the term structure of interest rates and financial risks.At present,the main driving force of fluctuations in China's financial system is the change in total supply capacity.The changing trend of China's financial risks is often affected by the fluctuation of the world's financial markets.Therefore,it is also necessary to strengthen the “firewall” of important financial sectors while promoting the integration of the world economy and marketization.Finally,based on the results of the causality test and the lagging regression equation,the term structure of interest rates can be effectively used to anticipate financial risks within a quarter.The study of the time-varying effects of the term structure of interest rates on the economic cycle shows that during the period of 2003-2017,the dynamic relationship between China's term structure of interest rate and capital structure and economic growth basically conforms to the capital-based economic cycle theory.The economic cycle theory holds that,credit expansion will lead to both consumption and investment increase and the emergence of temporary prosperity,and temporarily change the capital structure,which including economic resources flow,investment and consumption ratio,and the production and consumer price ratio.However,in the long run,this change in the capital structure is unsustainable and eventually leads to the emergence of an endogenous economic cycle from prosperity to recession.Finally,both the theoretical analysis and the empirical results show that the slope of the interest rate term structure can be used as a predictor of the economic cycle,and the positive impact of the term structure of interest rates on economic growth lasts for two quarters and turns negative since about the third quarter.In sum,as an important benchmark in financial markets,the term structure of interest rates has a close and complex relationship with macroeconomy.It not only responds to changes in economic policies but also has an influence on economic states.Besides the term structure data has the characteristics of high availability and high frequency.Therefore,the term structure of interest rates has become an excellent tool for anticipating the financial risks and the economic cycle of the two macroeconomic operational key issues.