The Research On Dynamic Response Of Term Structure Of Interest Rates To Macroeconomy And Policies In China

After more than two decades of development,the benchmark of China interest rate system has be formed,including Shanghai interbank offered rate and government bond yield curve which represent short-term and long-term interest rate separately.At the stage,that marketization of interest rates has been basically completed,the term structure of interest rates participates in micro-finance and macro-economic activities as anchor of risk-free interest rate.Therefore,it has great significance to research dynamic mechanism of the term structure of interest rates,such as investor to avoid the risk of investment,the government authorities to interpret the current economic problems,judging the expected economic situation,evaluating policy effect,and so on.However,due to the development of China’s bond market relatively is late and interest rates is controlled in history,the domestic study on the relationship between term structure of interest rate with macroeconomy,macroeconomic policy is rare.Hence,the research method is conventional and the dynamic stochastic general equilibrium framework is rarely used.It is urgent to research the relationship between China’s economy and the term structure of interest rates,by means of macro financial model which is combined by DSGE framework and different expression of the term structure of interest rates models.This paper focuses on the interactions between term structure of interest rates with macro economy to explain the dynamic relationship from simple to complex situation.Above all,combined by concise DSGE model and affine rates model,the macro financial model,explore the nonlinear dynamic characteristics of term structure of interest rates in the concise economic system.Then,the medium DSGE model is established,which is suitable for China’s economic environment,and the term structure of interest rates model is obtained by extending the asset pricing equation.This paper shows the dynamic features of the term structure of interest rates under impact of conventional policy.Thirdly,based on the introduction of interest rate market segmentation hypothesis,the long-short imperfect substitutable bond DSGE model is established.The dynamic relationship between macro economy and short-long rates is explored under the zero interest rate restriction,when China adopts the unconventional policy.Finally,in view of the open economy,financial integration and the current economic environment,the macro financial model is built on theory of financial accelerator and open economy,and try to analyze the influence of foreign economic variables impact on the domestic interest rate and economy.Specifically,This paper reviews the existing achievements of the theoretical and empirical research of the DSGE and term structure of interest rates.New Keynesian models originate from the RBC theory and monopoly competition and nominal rigidities is introduced,became to the optimal behavior and dynamic stochastic general equilibrium model,and gradually developed into a modern economic analysis frame.The term structure of interest rate theory can be divided into expectation theory,market segmentation theory,liquidity theory and preference theory theoretically.And the mathematical modeling method has experienced from static to dynamic,from the curve fitting to curve movement.With the strengthening of explanatory of macro-economic factors on the term structure of interest rates,macro-financial modeling has become a new way to study the term structure of interest rates.Secondly,the macro financial model which including two independent Markov Chain is based on the new Keynesian demand curve equation,Phillips curve,and monetary policy.The paper shows the different dynamic response of the term structure of interest rates between different economic system regimes.Thirdly,in order to explore the dynamic characteristics of term structure of interest rates under conventional policy.The expression of government public spending is introduced to utility function,and the government public capital is also introduced to the private sector production.The term structure of interest rates model is obtained by asset pricing equation in the optimal decisions on family,then macro financial model established.Based on Bayesian estimation,this paper explores the dynamic characteristics of term structure of interest rates in different economic system regimes.In addition,this paper attempts to discuss the dynamic response of interest rate and other macroeconomic variables when implementing unconventional monetary policy in China on the premise of non-zero interest rate constraint.To solve this problem,the short-term interest rates and the long-term interest rates is introduced to DSGE model,inflecting the main features of the interest rate curve.The family investment is also constrained,to represent the characteristics of bond market segmentation.Because of this hypothesis,analysis of the unconventional monetary policies is to be feasible.Finally,the discussion is extend from closed economic environment to open economy.When open macro financial model is set up,the traditional enterprise-the bank’s financial accelerator is extended to family-bank-enterprise credit chain,and the extension of the traditional bank for international banking sector.The result shows that the global bank integration became the new channel to broadcast the external economic risk,and the term structure of interest rates is not only affected by national economic variables,but also the external economy and policy.The empirical research results are obtained in this paper is following:In the respect of dynamic characteristics of term structure in nonlinear concise economic system.The results show that the main factor affecting the term structure of interest rates is regimes of monetary policy by inflation shock.The response curve has different movement mechanism by the monetary policy shock.Specifically,the dominant influence is the economic uncertainty in the beginning,then it turns to the regimes of monetary policy.The results also show that the response of production shock is persistent,and the economic uncertainty has more influence than monetary policy.In the study of dynamic response of term structure under the conventional policy and fiscal policy impact in Chinese economic environment,Epstein-Zin utility function is introduced,to reflect the term premium.The government expenditure is divided to productive and non-productive part,to reflect the different roles of government in the economy.This model gets the conclusion that the response of monetary policy has such features as sharp reaction,short response time and focuses on the short-end rates.While,the response of fiscal policy reveals the characters that contain moderate,persistence and focus on the mid-end and long-end rates.Besides,the different property of public expenditure has different response directions.The reason is that monetary policy changes the short-term capital lever by adjusting the policy interest rate,which has fine tuning effect on economic operation.Fiscal policy has the effect directly on economic entities and affects medium and long term interest rates.Under the assumption of bond market segmentation,it is shows that responses of the economic system after the implementation of the unconventional monetary policy without a zero bound constraint.The results demonstrate that the long term interest rates decrease by quantitative easing or operation twist,accompanied with rise in output and inflation.The results also reveal the response of output to unconventional monetary policy has obvious persistence feature.According to the current situation of our country,the economy is more suitable for operation twist at present stage.Compared with closed economic environment,the open economic model shows that domestic output fluctuation is consistent with the foreign output by the actual shocks represented by foreign technical shocks and the nominal shocks.The response of domestic economy to the foreign banks’ net assets shock is higher than that of traditional monetary policy shock or technology shock,and has the characteristics of high sustainability.Moreover,accompanied with the proportion of overseas banking business growth,the absorption and intensity of the external economic impact of the domestic economy is increasing.Under financial frictions assumption,the bank net assets become the new way to influence the term structure of interest rate.Through theoretical investigation and empirical research,some innovative results have been achieved in the following aspects:1.This paper discusses the dynamic response of term structure and macro-economy in different ways,expanding the current research direction This paper discusses the dynamic response of China’s term structure of interest rates in an economic system with regime switching.Then,it examines the impact of conventional and unconventional policies on term structure of interest rates.Finally,it extends the closed economic environment to the open economy and attempts to explore the impact of external shocks on domestic interest rates and economy.2.In the perspective of macro-finance modeling,the macro-finance model is based on different term structure of interest rates under DSGE framework,expanding the way of macro-finance modeling.It includes the RS-DSGE(Regime Switching DSGE)which is combined with affine interest rate model.A Medium sized DSGE model,according to the characteristics of China’s economy,and the term structure of interest rates is obtained through the iteration of asset pricing equation,forming a complete macro financial model.Under the hypothesis of interest rate market segmentation,the long term and short term interest rates are adopted to reflect the characteristics of the interest rate curve.The paper also tries to establish the open economy macro financial model using financial acceleration theory and non-arbitrage interest rate model.3.The different macro financial models are established.It is showed that combination of DSGE and term structure of interest rates models are diversified.Meanwhile,the advantages and disadvantages of each macro-financial models are also evaluated.This research has made some valuable conclusions.Due to restrictions of the theory and the actual economic data,there are still some shortcomings in the deeper research and macro financial model extension.It is expected that with the development of the theory and the enrichment of economic data,making improvement in the follow-up research.