An Empirical Analysis Of The Relationship Between Chinese Interest Rate Term Structure And Monetary Policy

With the reform of financial market development, interest rate plays a more and more important role in the assets allocation. Theoretical and experience shows that, interest rate term structure contains the future information of interest rate and inflation expectation. Moreover, the interest rate is the monetary policy objective and macroeconomic regulatory method. Along with our country interest rate marketing process advancement, it is necessary for us to analyze the relationship between interest rate term structure and monetary policy.The thesis begins from reviewing the research on traditional and modem interest rate term structure theories both at home and abroad. Then the thesis gives a brief introduction of monetary policy and elaborates the relationship between interest rate term structure and monetary policy. After that, the thesis focuses on the empirical analysis of interest rate term structure of inter-bank bond market in three parts. Firstly, the thesis chooses Nelson-Siegel model to fit domestic interest rate term structure and demonstrates the validity of the model by forecasting results and shaping fitting.Secondly, according to expection theory, the thesis builds regression equation of long-term, short-term interest rate spread and inflation change. Empirical analysis shows that domestic interest term structure contains 1-year later inflation information. Thirdly, the thesis analyzes the impulse response and variance decomposition of cash reserve ratio, lendable funds, monetary supply M2-M1 to 1-Year and 30-Year bond respectively. Finally, according to the empirical results and the environment of financial market in our country, the thesis gives policy suggestion.The thesis comes to the following conclusions:Nelson-Siegel model better fits the domestic interest rate term structure; domestic interest rate term structure can predict 1-Year later inflation as to provide reasons for the people's Bank of China to draw up policies; the policies made by the people's Bank of China are lagging which have a greater influence on short-term interest rate than long-term interest rate.