Research On The Relationship Between Size & Structure Of Bond Market And Money Supply

Through theoretical and empirical approach, I have tested the relationship between size of bond market, structure of bond market and money supply, and I try to explore whether the bond market itself is ripe enough as a platform for open market operations. Research of this paper is divided into three parts:The first part is the theoretical analysis of the links and interaction of bond market and money market, which provides theoretical support for the second section. The second part is empirical analysis, which choosing size of bond market, structure of bond market and money supply as variables, uses the canonical correlation analysis, unit root test, cointegration and Granger causality test method. And the regression results showed that:Firstly, the balance of bond, which represents scale variable, has a significant impact on the annual increment of M2. Secondly, debt structure variable, the percent of short-term debt balance in total debt balance, which represents debt structure variable, has a significant impact on the annual increment of M2. The third part give some proposals based on the above two parts. Proposals are mainly divided into main ideas and specific proposals for the development of China’s bond market.