The Influence Of Term Structure Of Interest Rates On Inflation Expectation And Inflation Uncertainty

With the deepening and promoting of marketization of interest rate, the macroeconomic information contained in the term structure of interest rates becomes the focus of study.At the same time, price stability has been the most headache problem for monetary authority. Inflation expectation management and the implementation of monetary policy need the term structure of interest rates as a forward-looking indicator. This thesis focuses on the effect of interest rates’term structure on the inflation expectation.From the perspective of term structure of interest rates, this thesis studied the impulse of long-term interest rates and short-and long-term differentials on inflation expectations. The dynamic NS model is used to analyze China markets’term structure. It’s split the Level factor of long-term interest rates, Skew factor of the short-and long-term spread. And on this basis, we can get the guidance of inflation expectations management. The data of inflation expectations used in this thesis is from People’s bank of China’s survey statistics and monthly inflation expectations index data. The public used historical information and existing information to expected future price changes. This data can not reflect inflation uncertainty. However, the reasons for the central bank’s monetary policy failure or distorted factors come from all kinds of uncertainty that unable to predict in advance. When the central bank formulating and implementing the monetary policy is hoped to minimize uncertainty factors. So the inflation uncertainty factor should be considered in the study of impact of term structure on inflation expectation. The policy suggestions through this method is more guidance and helpful to the central bank to control inflation and achieving price stability. So in this thesis, six measure model will be compared and finally the GARCH model is chosen to measure inflation uncertainty. It’s used to represent the volatility of inflation and the changing of inflation accidental changes.Finally, the thesis selects the time-varying parameter vector autoregressive model (TVP-VAR) according to the two main lines through the impulse response to analysis of the term structure affect the adjusted inflation expectations. Firstly, this thesis chooses three key point:high inflation and the tightening monetary policy, the important node of interest rates’marketization reform, expansion period of monetary policy. We found that the shock of interest rate policy impacts the inflation expectations and inflation uncertainty. When the environment is high inflation to manage inflation expectations, the central bank monetary policy or interest rate marketization reform measures will not cause the changing of interest rates’impulse. As long as the central bank’s monetary policy is through changing the short-term interest rates rather than long-term interest rates that the monetary policy can be controlled the effect of response. Secondly, by selecting different lag period to found the cost of the time lag effect and unexpected interest rate policy’s cost effect. Finally through study the impaction of term structure of interest rates for correction inflation expectations, the thesis puts forward many targeted policy suggestions for the central bank’s monetary policy implementation and management of inflation expectations.