The Nonlinear Effect Of Monetary Policy On Credit Spreads Via Smooth-transition-regression Model

Traditional theory holds the opinion that the credit spread of bonds is a part which used to compensate investors for the risk of their purchased assets.It is measured as the difference between the bond interest rate and the risk-free interest rate.Since 2011,China's economic has been continuously declining.Facing with rising debt pressure,company had more credit risks,it should has the credit gap increased.However,contrary to the facts,credit spreads have been continuously decrease over the past few years.This situation vary from the previous literature.The "intensive" and "burst" of default events lead to a distinctly different characteristic from the past when credit spreads return to their mean values.Therefore,in the context of the new economic environment,studying the new volatility characteristics of credit spreads has a high theoretical significance and strong practical significance.The existing literature has different opinions on the factors affecting the credit spreads.Different scholars have different or even opposite conclusions based on the conclusions of different markets and different periods.This article attempts to use a new model to arrive at a more general conclusion from a new perspective.It can more effectively reflect the operating characteristics and operating laws of China's current market characteristics of credit spreads.Based on this background,this paper takes the corporate bond credit spread as the research object.This paper uses a total of 129 monthly data from 2006 to 2016.First,build a regression model based on previous linear VAR models used by scholars,and study currency by a series of proxy variables.The effect of open market operations on credit spreads for bonds of different durations in the policy.The empirical results show that under the premise of the same credit rating,the effects of monetary policy adjustment and macroeconomic fluctuations on credit spreads gradually increase with the maturity of corporate bonds;the broad money supply of the central bank's monetary policy and the central bank's open market currency net The spread of bond credit spreads has a more significant positive effect.The CPI of macroeconomic variables has a greater impact on credit spreads,while the impact of PPI and exchange rate levels on credit spreads is relatively small.Then,based on the VAR model,a non-linear smooth transition STR model is constructed.The PPI is used as a transition variable to simulate the different fluctuation characteristics of the credit spread in the economically stable operation and the sharply descending state,and between the two states.Non-linear smooth transition.Comparing the nonlinear STR model with the VAR model fitting results,we can find that,from the point of view of statistics,the goodness of fitting and the significance of each variable are improved after changing to the STR model;from the perspective of economics,the STR model is also more accurate.The characteristics of the fluctuation of credit spreads,namely,non-linear asymmetry,are described: In normal circumstances,the results of the two models are basically consistent,that is,the impact of each variable on China's credit spreads is not obvious;when the PPI is substantially The STR model and the VAR model begin to exhibit distinct characteristics.In the STR model,the net cash withdrawal of the open market operation will significantly negatively affect the credit spreads,and the money supply M2 will be significantly positively transmitted to the credit spreads.In the macro economy,CPI and PPI will be transmitted to credit spreads at a time lagging behind.These features cannot be represented by the VAR model.It is the non-linear characteristics exhibited by the model when the transition function G transitions smoothly to zero,which more accurately describes the change in the one-year corporate bond credit spread when the economy falls sharply.Here the STR model's non-linear,asymmetric features are well demonstrated.The empirical results show that the impact of credit spreads under different macroeconomic conditions is quite different,and this explains why the past scholars have different empirical data and the results are very different.This article hopes to explore the fluctuation characteristics of China's credit spreads and refine the main influencing factors of China's credit spreads,so as to provide certain reference for the central bank and investors in grasping changes in credit spreads and carrying out analysis and decision-making.