An Empirical Study On The Term Structure Of China’s Interest Rate With The Introduction Of Macro-varibles

With the deepening development of Chinese bond market,the deepening development of financial innovation,the continuous enrichment of financial products and the gradual marketization of interest rate,the importance of study on interest rate term structure and related issues has become increasingly prominent.It is of great theoretical and practical significance to study the term structure of the interest rate of Chinese national debt.Interest rate term structure is a function of interest rate and duration.It is the basis of financial asset pricing,financial product design,arbitrage and speculation.It is not only provide a benchmark for pricing the various bonds,but also provide the basis of derivative pricing.In addition,the interest rate term structure contains rich macroeconomic information,which is of great value to the formulation of central bank policies.Interest rate term structure plays a important role in the macroeconomic field and has been highly concerned by monetary policy makers.In recent years,because of linkage between interest rate term structure and macroeconomic,some scholars have begun to study the influence of macroeconomic information on interest rate term structure,and construct the interest rate term structure model with macroeconomic information.However.the question of how macroeconomic information is introduced into the term structure model has always been a major controversy in academia.According to the above problems,first this paper introduces the macroeconomic variables into the dynamic modeling of interest rate term structure in the form of Taylor rule from the perspective of monetary policy formulation with Chinese macroeconomic data.In order to achieve this modeling effect,this paper quotes the Rotated Dynamic NS model(ie,the RDNS model)proposed by Nyholm(2015).On the basis of the DNS model proposed by Diebold and Li(2006),a transformation matrix is introduced to transform the traditional three-factor factor into three factors including short-term interest rate.Short-term interest rates are stripped off as a factor that has an effect on the term structure of interest rates.And the macroeconomic variables are introduced into the RDNS model in the form of Taylor rules.The Taylor rule is one of the most simple monetary policy rules under which the central bank should adjust its short-term interest rate policy based on inflation levels and output levels in the economy.Thus,this paper chooses the CPI and IP as two macroeconomic indicators,CPI can usually reflect the level of inflation in the economy,IP can represent the output of the economy.It is more convincing that introducing the macroeconomic variables into the model in the form of Taylor’s rules both in theory and in the process of making the actual monetary policy.In addition,another prominent contribution of the RDNS model is that the expression of the term premium can be derived directly from the model,so that the term premium of the term structure of Chinese interest rate can be obtained directly.And in the traditional DNS modeling process can not directly get the term premium expression.The estimation of the term premium for term structure is very important for the risk management of financial institutions and the pricing of derivative products,which is also the unique innovation of RDNS model.Secondly,this paper constructs the RDNS model of Chinese interest rate term structure with the empirical data of China.And CPI and IP are introduced into the RDNS model.In the experimental design,this paper sets out three groups of experimental design scheme to explore whether Chinese macroeconomic variables have significant influence on the term structure of interest rate.It includes:(1)the RDNS model without macroeconomic variables;(2)the RDNS model with the macroeconomic variables;(3)the RDNS model with the macroeconomic variables and includes the breaks in the time series;In this paper,we can see the experimental design(1)as a benchmark,and see the experimental design(2)and(3)as the contrast groups.And then we can analysis that if it has a significant relations between Chinese macroeconomic variables and the term structure of interest rate.Finally,the experimental results of this paper show that:(1)The macroeconomic variables have no significant effect on Chinese term structure of interest rate without segmenting the macroeconomic time series.However,after segmenting the Chinese economic time series,Chinese macroeconomic variables show a significant impact on the term structure of interest rates,that is,the sudden changes in the macroeconomic variables can help improve the significant effect on Chinese term structure of interest rate;(2)macroeconomic information and transformation of dynamic NS model The influence of the first order lag term of the potential factor on the term structure of the interest rate has the alternative relationship.