A Research On Relation Between Interest Rate Term Structure And Macroeconomic In China

Interest rate is an important variable in the overall macroeconomic, which is the price of financial or capital. It reflects supply and demand of social funds. Interest rate term structure refers to a curve of the yield to maturity, bore by zero-coupon bonds with different maturities which cover the same level of risk. It describes the level of interest rates of different maturities on a particular point in time. Interest rate as the basis variable in the financial sector, has an important role in the field of micro and macro. In the micro, the term structure of interest rate acts as a pricing basis of the financial products and derivatives, and companies can also use it for risk management, reasonable asset portfolio. In the macro, the influence of market interest rate on investment, consumption and export thus on GDP also be a factor which has to be considered when the central bank is going to issue its monetary policy. In the accelerative background of domestic interest rate marketization, we choose the term structure of interest rate as the research object, apparently which has important practical significance.Firstly, the theory about the term structure of interest rate has been taken a systematic review. We introduce the static method and dynamic approach to estimate the term structure of interest rate and track to foreign latest macro-financial model, then yield data on China’s interbank bond market was used in empirical research. We build NS model of the bond market yield curve and estimate the parameters of it. Empirical results show that the estimated parameters of NS model are effective overall on the 90% confidence level, which verifies that it can effectively estimate the domestic interest rate term structure. This point can also be confirmed through the comparison between before and after the curve fitting charts.Next, four macroeconomic variables were selected which were added value of industry, money supply, inflation and U.S rate spreads, The three factors of term structure and four macro variables up to seven sequences were loaded into the VAR model, aim to explore the relationship between three factors and macroeconomic variables. Granger causality test result shows that there is a bidirectional relationship between macroeconomic variables and three factors of the term structure. From macro variables to three factors:IP, CPI and peripheral rate spreads Sp are the Granger cause which affects the level factor L; monetary policy M2 and peripheral spreads Sp are the Granger cause which affects the slope factor S; From three factors to macro variables:the slope factor represents the short and long term interest rate spread, regardless of the external Sp and domestic spreads S is Granger cause of IP; CPI is an endogenous variable, affected by the level factor L, output IP and money supply M2. Impulse response and variance decomposition quantitate their mutual relationship. Based on our research, we propose that the interest rate can be used as the intermediate target of monetary policy, but there is still a lot of work to do, which is the subsequent research of this article.