Central Bank Bills, The Market For Long-term Interest Rates Affect The Empirical Analysis

In recent years, central bank notes have been one of the important monetary policy tools for people's bank of China. The stable relationship between the central bank notes rates and long-term rates will influence the monetary policy transmission effect, and also it can show that if the central bank can adjust long-term rates effectively through short-term rates.The author chooses 3-month central bank notes rates and 10-year treasury rates in the inter-bank bond market from January 2008 to February 2011, and makes the empirical analysis about the affection of central bank notes rates as short-term rate tool on the long-term rates through constructing error correction model, and using the method of impulse response and variance decomposition, based on the theoretical analysis about the relationship between the short-term and long-term rates.The search shows that inter-bank central bank notes rates and 10-year treasury rates have long-term equilibrium relationship, and the former has a positive effect to the latter. That means when central bank notes rate rises, the inter-bank 10-year treasury rate has a trend to rise, too. It's consistent to the expectation theory. However, the result shows that this positive influence is not very great, which means the movements of central bank notes rates can't dominate the movements of 10-year treasury rates. On the one hand, Study suggests that it may not be able to achieve the ideal affection for the monetary authorities which try to use short-term interest rates to adjust long-term interest rates effectively and thus control the macroeconomic through issuing central bank notes. On the other hand, it is not feasible to use rates as monetary policy intermediate target instead of money supply completely. Central Banks need to simultaneously use interest rates and money supply for the intermediary target.