Research On Development Of Inter-bank Bond Market And Mechanism Of Monetary Policy Transmission

This paper focuses on the action mechanism of inter-bank bond market in monetary policy transmission and lays emphasis on three questions. The first question is how the monetary policy is transmitted into inter-bank bond market and whether the monetary policy information can be used for forecasting the price fluctuation of inter-bank bond market. The second question is how inter-bank bond market transmits monetary policy information into capital market and real economy system. The last question is how the development of inter-bank bond market changes the effectiveness of monetary policy transmission and how we improve the structure of bond market and the control means of monetary policy to realize perfect operation of monetary policy transmission mechanism from this view.The article contains six chapters and the specific content is as follows:Chapter One is a literature review of the development of inter-bank bond market and the monetary policy transmission. This chapter tries to theoretically excavate the function of inter-bank bond market in monetary policy transmission and to build the theoretical framework for the research of the article. From the angles of"monetary view"and"credit view", the function and mechanism of bond market in traditional theory model in monetary policy transmission are systematically demonstrated. Monetary policy transmission can be divided into theory module and demonstration module. The research emphasizes on the transitive relation between subject behavior and economic variables in monetary policy transmission. Based on the above, the key link and logical framework which are used for researching the function of the development of inter-bank bond market in monetary policy transmission are obtained in this chapter.Chapter Two is the theoretical analysis on the function of inter-bank bond market in monetary policy transmission. From two stages of monetary policy transmission, the impact brought by the development of inter-bank bond market to the supply and demand of money is studied in this chapter. In addition, the theory of"investment bell"and the asset allocation model are used for demonstrating the mechanism of influence of the subjects'behavioral change in inter-bank market to monetary policy transmission.Chapter Three is analysis on the quantitative characteristics of inter-bank bond market in monetary policy transmission. Through analysis on the microstructure and function of inter-bank bond market, and combining with the practice and quantitative characteristics of the monetary policy operation in our country, the quantitative relation between inter-bank bond market and monetary policy operation in our country is described and the defect function of our bond market in monetary policy transmission is demonstrated.Chapter Four is analysis on the function of inter-bank bond market in our country in the open market. From the open market operation principle of Chinese central bank, the premise and operation tool of Chinese central bank's open market operation are deeply analyzed combining with the development of inter-bank bond market. In addition, key research is made to properties and defects of central bank bills which are presently the main operation tools of Chinese central bank. Based on the comparison of fluidity, basic, capacity and casual relationship of the carriers on which the interest rates rely, this paper considers that government bond yield and pledge repo rate can act as the benchmark interest rate of monetary market while relatively big defects still exist in the aspect of term structure.Chapter Five is empirical analysis on the function of inter-bank bond market in monetary policy transmission. Using the VAE model and combining with impulse response function, variance decomposition, vector error correction model and event study, the influence from monetary policy on inter-bank bond market price and the influence from inter-bank bond market price on capital market price and real economy are demonstrated. Empirical results show that the influence from money supply in monetary policy and deposit reserve rate policy on the price of bond market is not obvious, while the influence from interest rate policy on the price of bond market is obvious. Chapter Six is development of inter-bank bond market and monetary policy transmission. The challenge from development of inter-bank bond market to monetary policy and the suggestion of development of inter-bank bond market in our country are analyzed specifically. The development of bond market brings abundant variety and more reasonable structure to the operation tool of monetary policy; the development of bond market makes the excess reserves harder to control by the central bank, so the ability to control the supply of money may be further weakened; after bond market interest rates become the foundation of the benchmark interest rate formation in our country, maybe intermediate target of monetary policy in our country will turn to rate target.The main contributions of this paper are as follows:1. The research angle is relatively novel. The"black box"bond market in the past monetary policy transmission is taken as the core. From the asset allocation behaviors of central bank, commercial bank, enterprises and residents, the mechanism of influence of the bond market to the supply and demand of money, and the influence of bond market on monetary policy transmission mechanism are researched, and then the theoretical framework of bond market in monetary policy transmission is built on the three links.2. The empirical model of monetary policy transmission research is referred while methods such as VAR model, vector error correction model, pulse function, variance decomposition, casual relationship and event study are systematically used. The influence of the monetary policy in our country on inter-bank bond market price, the influence of inter-bank bond market price on exchange bond market price and stock price and the influence of inter-bank bond market price on real economy are analyzed from empirical view, and then the basic reason for the present difficulty of mechanism of monetary policy transmission in the bond market in our country is obtained.3. The influence of the development of inter-bank bond market on the policy tool, operation target and intermediate target of monetary policy is demonstrated using VAR model, and then the challenge and opportunity from the development of bond market in our country to mechanism of monetary policy transmission are obtained. In addition, the direction of reform of the inter-bank bond market in our country is investigated from the view of monetary policy transmission.