The Influence Of Economic Policy Uncertainty On The Price Fluctuation Of Credit Bonds

The Financial Stability Report 2020 released by the People’s Bank of China shows that the capacity of China’s capital market to serve the real economy continues to grow.However,the development of the bond market still faces many risks and challenges,among which economic policy uncertainty is one of the major challenges.In this context,studying the impact of economic policy uncertainty on credit bond price volatility is important for the government to formulate forward-looking and sustainable economic policies and maintain the healthy development of capital market.In view of this,this paper uses mixed-frequency data and establishes a GARCH-MIDAS model for the study.The GARCH-MIDAS model organically combines the daily credit 100 index data with the monthly economic policy uncertainty index,retaining the economic information contained in different frequency data.After constructing three sets of GARCH-MIDAS models under different variables to study,and conducting model regressions and model forecasts for the three sets of models,respectively,it is found that the regression results and forecasts of the models with the values of credit bond real volatility and economic policy uncertainty index as independent variables are the best.The results show that,firstly,in the long run,the economic policy uncertainty index is the Granger cause of credit bond prices,which is mainly due to the time lag effect of economic policies from formulation to effect.Second,economic policy uncertainty has a negative impact on credit bond price volatility,mainly because governments tend to make countercyclical adjustments when making macroeconomic regulation,and this negative impact is reinforced through the monetary policy channel and weakened through the market sentiment channel.Thirdly,the level value of the economic policy uncertainty index is an important factor in the prediction of credit bond price volatility,and the finding passes the robustness test.These provide empirical evidence for stabilizing China’s financial market and promoting the healthy development of the bond market.Finally,based on the above research results,this paper puts forward policy recommendations such as improving the appropriate decision-making measures,reasonably guiding market sentiment,and improving the credit bond information disclosure mechanism.