Understanding Chinese Bond Yields and their Role in Monetary Policy
AbstractChina's financial prices are informative enough for the PBC to introduce a monetary policy framework centered around interest rates. While bond yields are not fully efficientï¿½reflecting regulation, liquidity, and segmentationï¿½we find they contain considerable information about the state of the economy as well as evidence of an emerging transmission channel: changes in PBC rates influence the structure of Treasury, financial, and corporate bond yield curves, which are then associated with changes in growth and inflation. Coporate spreads are also a leading indicator of growth and inflation. While further liberalization will strengthen both efficiency and transmission, several necessary elements to move towards indirect monetary policy are already in place.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 11/225.
Date of creation: 01 Sep 2011
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-15 (All new papers)
- NEP-CBA-2011-10-15 (Central Banking)
- NEP-MAC-2011-10-15 (Macroeconomics)
- NEP-MON-2011-10-15 (Monetary Economics)
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