The Analysis Of Influence Of Monetary Policy On The Term Structure Of National Debt

In the macroeconomy,interest rates represent the price of funds,and its size reflects the relationship of supply and demand of funds in the market,which has a very important impact on the whole economy and society.Interest rate term structure plays an important role in the transmission of monetary policy.It is generally believed that monetary policy first affects short-term interest rates and then gradually conducts to long-term interest rates,thus driving the overall interest rate changes.October 23,2015,the central bank announced the abolition of commercial banks deposit interest rate floating ceiling,which pushed the process of interest rate marketization to a new height and opened a new time.But the current China is in a comprehensive deepening reform of the crucial period."Thirteen five" plans to solve the structural imbalance,to achieve monetary policy transformation.In the dual background of the acceleration of domestic interest rate marketization and comprehensive reform,it is theoretically and practically important to study how monetary policy affects the term structure of national debt interest rate,and how the interest rate conducts to the total demand and total investment of a country.Based on the above background and motivation,this paper uses empirical research,event analysis combined with quantitative research.Firstly,the traditional theory of interest rate term structure and the transmission mechanism of monetary policy on interest rate term structure are expounded.The empirical research at home and abroad is reviewed,and the monetary policy and national debt market are introduced.Monetary policy practice mainly introduced monetary policy tools used by the central bank in recent years.The introduction of the national debt market includes the development of China's national debt market and several issues.In the part of typical event analysis,the statutory deposit reserve ratio and the benchmark interest rate and short-term liquidity adjustment tool SLO are selected.These three important monetary policy tools are respectively used to study and observe whether the interest rate period structure changes or not and its law in the first trading day,the fifth trading day and 1 month later after the central bank announced the adjustment of the statutory deposit reserve ratio or benchmark interest rate or SLO performance.If the day of the announcement day the market is not trading,the previous trading day data are selected.In this paper all the monetary policy operations about the statutory reserves are included from 2011 to 2016 divided into two categories in order to avoid the effect of accidental events.The same ideas and methods are used in the adjustment of the benchmark interest rate and SLO performance.The results show that after adjusting the statutory deposit reserve ratio,the interest rate is larger than the previous one in the three time periods of the study.It can be seen that there is a certain delay in the policy influence,and the impact on the short-term interest rate is greater than that of the long-interest rate.But the difference is that the effect of raising and lowering the statutory deposit reserve ratio is asymmetric.Decreasing the statutory deposit reserve ratio will results in a larger interest rate decline and the yield curve slope increases.Raising the statutory deposit reserve ratio will results in a smaller interest rate rise and the yield curve slope decreases.It can be seen that the effect of lowering the statutory quasi rate is better.While the increase in benchmark interest rate leads to a decline in short-term interest rates and an increase on long-term interest rates,a month later the increase in interest rates is more obvious.Decreasing the benchmark interest rate results in down of the term interest rates 5 trading days later and an up of the interest rates a month later,except for some individual term interest rates.SLO operations immediately impact the short-term Treasury interest rate of less than 6 months.A month later the impact will be transmitted to the long-term interest rates,making long-term interest rate change greatly.In the quantitative analysis section,this paper selects data of 67 months from May 2011 to November 2016,including national debts of 14 maturities for empirical analysis.This paper firstly uses the mature NS model to extract the first three factors,which are horizontal value,slope and curvature of the national debt interest rate,to describe the interest rate term structure,and take these three factors as the explanatory variables.In addition,the three factors are respectively closely related to the long-term interest rate,the difference of short-term and long-term interest rate,the sum of medium-long term spreads and medium-short term spreads of the national debt interest rate.It is found that the trends are highly consistent and that validates the NS model's feasibility in theory and practice.In the VAR model,this paper chooses the money supply M2,the one-year interest rate R of the central bank bills,the seven-day repurchase rate R007 and the statutory deposit reserve ratio RR as the monetary policy variable according to the previous literature.Before building the mode,the seven sequences are carried out ADF stability test.It is found that except for the latter two factors and the statutory deposit reserve ratio,the other four variables are non-stationary sequence,but their first-order differential sequence is smooth and cointegration relationship exists between these three factors and explanatory variables.So it is suitable to use these first-order differential sequences to establish the VAR model.Under the premise of stable sequence,the three factors of the term structure of the national debt interest rate are respectively used to constructed the VAR model with the four monetary policy proxy variables,and the impulse response function and variance decomposition analysis are carried out.It is found that the impacts of different monetary policy variables on China's debt bond interest rate are different.The difference lies in the extent and duration.The statutory deposit reserve ratio has a greater impact on the horizontal factor.While M2 and seven-day repurchase rate has a greater impact on the slope factor.At the same time the central bank bill interest rate and the seven-day repurchase rate has a greater impact on the curvature factor.That is to say,the statutory deposit reserve ratio has more significant impact on long-term interest rates.M2 and seven-day repurchase rate significantly affect the long-short term spread.Central bank bill interest rate and repurchase rate significantly affect the sum of medium-long term spread and medium-short term spread.Finally,I examine whether the three factors of the yield curve can predict the macroscopic variables.It is found that the curvature factor can be used as a leading indicator of the CPI and the horizontal factor can be regarded as the leading indicator of the industrial added value.