The Effects Of U.S. Unconventional Monetary Policy On Term Structure Of Interest Rates

Firstly, This paper carding a more comprehensive and systematic study of the existing literature on the theory of the term structure of interest rates and monetary policy theory. This paper considers:(1)The information which the term structure of interest rates contained has an important role to judge the macroeconomic situation and financial market stability; (2) The formulation and implementation of monetary policy should consider the case of the term structure of interest rates, the formulation of monetary policy which is concerned only with short-term interest rate is flawed; (3) The relationship between the term structure of interest rates and monetary policy has important implications for the theory and practice of monetary policy. Such as:the target of China’s market-oriented reform of interest rate is to form its own benchmark yield curve, when achieve this goal, the design of monetary policy, implementation and macroeconomic control will be highly dependent on the relationship between monetary policy and benchmark yield curve. Due to the current theoretical research about the term structure of interest rates and monetary policy in this aspect is very limited, so the researches in this paper to study monetary theory and the theory of the term structure of interest rates are the perfect complement. From the theoretical point of view, the ideas and achievements of this paper in this important field of research were consolidated and deepened; From a practical perspective, the study of this paper, although based on the United States, provides an important way to learn for our country in the interest rate liberalization and the monetary policy which is based on the practice of price regulation in future.Secondly, this paper studied unconventional monetary policy, and the relationship between conventional monetary policy and the term structure of interest rates is even more closely. From nearly half a century of economic history, the economy is always accompanied by economic (financial) crisis. To face of the crisis, the central bank’s monetary policy has become the last savior. Since the 2008 subprime crisis, central banks around the world have generally adopted unconventional monetary policy to save the economy, and a variety of unconventional monetary policy, often through a direct impact on the term structure of interest rates, thereby affecting the economy. In this paper, using IS-MP model, CC-LM model and the IS-LM-BB model, unconventional monetary policy is analyzed theoretically, since these models for financial intermediaries (banks), short-term interest rates and long-term interest rates have portrayed, so the analysis about the impact and mechanisms of unconventional monetary policy is very powerful. This paper find quantitative easing operations analysis, credit easing operation, the operation is expected to guide the long-term bonds and buying operations, there is a direct impact on the long-term interest rates (interest rate term structure) and output can be expected to achieve its policy intentions.Finally, the practice of the United States, for example, the relationship between monetary policy and interest rate term structure were studied. In order to quantify the impact of unconventional monetary policy on the term structure of interest rates, we use the dynamic Nelson-Siegel model would get yield curve factors of time-series data, obtained the three factors:the level of factor L, slope factor S, the curvature factor C. Then, according to the DRA (2006) method to create the S VAR model which included macro factors (with monetary policy variables) and three-factor of the term structure of interest rates, and use the impulse response function and variance decomposition analysis to emphatically analysis the impact of monetary policy on the term structure of interest rates. The study found the impact of unconventional monetary policy on the term structure of interest rates significantly. Overall, the quantitative easing policy and long-term bonds bought impact on the level factor and slope factor relative to the maximum, the maximum level of factor impulse response functions were -0.099233 and 0.090471, slope factor of the impulse response function of the maximum values were 0.114944 and -0.089923. Bought long-term bonds and MBS effects on curvature factors relative maximum, the maximum impulse response functions of curvature factor were 0.106254 and -0.054327.