Empirical Study Of How Government Debt Factors Would Influence Monetary Policy

Since the outbreak of the global financial crisis in 2008,in order to boost the economy and to prevent excessive economic recession, the world’s major economy entities have implemented proactive fiscal policies,which directly lead to the significant growth of government debt levels. As a matter of fact, overly high debt level can readily trigger financial crisis, therefore, under the assumption of eliminating the possibility of financial crisis, strengthening the coordination between the government debt management and the central bank monetary policy,and avoiding the conflict between debt and monetary policies has become vital issues for most countries.With the launch of financial sector reform and the accelaration of financial innovation in China, the focus of monetary policy has gradually transformed from quantity to price,and then, the term structure of interest rate of government debt is playing an increasingly essential role in the transmission mechanism of monetary policy, and even further, in the macroeconomic regulation. Thus, this dissertation explores and discusses the predictable function of government debt upon monetary policies from the perspective of the term structure of interest rate.This paper discusses the impact of monetary policy on government debt from anew perspective of the term structure of interest rate, and based on that, seeks how the debt management will affect the issue of monetary policies. Also, this paper briefly elaborate the effect on economic development by the issurance of appropriate government policy, and then proposes several corresonding suggestions. First, this paper discusses the significance of selecting this topic and states the related theoretical basis, and then clarify the operating mechanism and theoretical basis upon how government debt factors would affect monetary polices. In addition, this paper focus on two empirical study of fourth chapter. The first Empirical Study explores the empirical analysis in terms of how term structure of interest affects monetary policy. By implementing VAR model, this analysis researches how the interest rate of key dates within the inter-bank government bond market influence the representitive indicators of monetary policies, reaching the conclusion that the information contained within the term structure of interest will to some extent predict the issue of monetary policy; secondly, another empirical study involves government debt factors into the VAR model that encompasses the term structure of interest rate and monetary policy indicators, and discusses in what way can term sturcture of interest rate affect monetary policy, and then comes to an conclusion: from the viewpoint of term structure of interst rate, certain variables ofgovernment debt factors could to some degree guide the monetary policy. The final chapter of this article is about some relevant recommendations for our country,especially with respect to perfecting the coordination mechnism of government debt factors and monetary policies,under the context of marketization of interest rate. Finally, this dissertation proposes the main conclusions and outlook for further research, and furthermore, finds out collaborative methods for the synergy of debt and monetary policy policies and measures,and strives to promote the economic development.