Study Of Relation Between Bond Market Development And Economy Growth In China

The bond market is an important component of the financial market and China's bond market has developed rapidly in recent years.This phenomenon of the development of the bond market sets up the conditions of liability and liquidity management for commercial banks and other financial institutions and also lays the foundation for the central bank to implement monetary policy by publicizing market operations.Therefore, it is necessary to study the mechanism of bond market and economic growth, which will provide empirical support for China's financial reform and development, as well as the global reference for all financial authorities in the world.In this paper, we investigate the relationship between the bond market and economic growth by applying a combination of theoretical and empirical analysis methods both qualitatively and quantitatively. First of all, we analyze the structure of the current bond market in China, pointing out the meaningful existence of the bond market as a bridge between the money market and the capital market.Secondly, we also explore the mechanism of the interaction between bond market and economic growth based on the relevant theories of economic growth and financial development. Theoretically, we select three major variables according to the size and liquidity of the bond market . Through VAR models and the Granger causality test, we empirically studied such processes in both the long-run and the short-run. The results show that there is a long-run equilibrium relationship between China's bond market development and economic growth, which is verified by long-term Granger causality test. However, the short-term relationship between the two is not significant, which is due to the defect existing in the current bond market of China. Finally, we analyze the reasons of the mentioned non-equilibrium and propose political and technical suggestion aiming to solve the non-equilibrium problem.