The Effect Of Monetary Policy On The CNY Interest Rate Swap Spread

With the development of interest rates liberalization of China, financial institutions and other market participants will face increasing interest rate risk.As one of the financial derivatives to hedge interest rate risk, interest rate swap gets more and more attention from scholars.Because swap spread is an important factor to measure the interest rate swap, this article will study interest rate swap spread.First, we divide the data from January 4,2010 to December 31,2013 into two parts, and test them with Chow test. Then we study the determinants of swap spread under different monetary policy regimes, including liquidity premium, default risk premium, interest rate fluctuations and the slope of the term structure. Finally, we use VAR model and impulse response function to analysis the impact of required-reserve policy and open market operations on swap spreads.Through empirical analysis, we come to conclusions that 1) under different monetary policy regimes, the default risk premium, liquidity premium, interest rate fluctuations and different slope of the term structure of interest rates have different effect on swap spread.2) Required reserve policy and open market operations have positive effect on swap spread, but the extent and duration of their impact on swap spread are not the same.