IDEAS home Printed from https://ideas.repec.org/a/gam/jmathe/v13y2025i16p2586-d1723199.html
   My bibliography  Save this article

Monetary Policy and Liquidity of the Bond Market—Evidence from the Chinese Local Government Bond Market

Author

Listed:
  • Xiao Liu

    (School of Economics and Management, North China University of Technology, Beijing 100144, China)

  • Yunzhe Hu

    (China School of Banking and Finance, University of International Business and Economics, Beijing 100029, China)

  • Fang Liu

    (Jinan City Construction Group Co., Ltd., Jinan 250014, China)

  • Rongxi Zhou

    (China School of Banking and Finance, University of International Business and Economics, Beijing 100029, China)

Abstract

The bond market serves dual roles in fiscal and financial spheres, playing a crucial role in coordinating monetary policy. This paper investigates the impact of quantitative and price-based monetary policies on the liquidity level of China’s bond market. A comprehensive index measuring the liquidity of the local bond market is constructed using a combination weighting method that integrates the entropy method and the coefficient of variation. Employing the time-varying stochastic volatility structure vector autoregression (TVP-SV-SVAR) model on data spanning from 2013 to 2021, this study empirically compares the impulse response of local bond market liquidity to monetary policy shocks. The findings reveal that both types of monetary policy operations exhibit asymmetric, nonlinear, and time-varying impacts on bond market liquidity. Quantitative monetary instruments induce deeper impulse responses, with longer-lasting effects. These conclusions offer insights for monetary policy reforms and bond market development in China.

Suggested Citation

  • Xiao Liu & Yunzhe Hu & Fang Liu & Rongxi Zhou, 2025. "Monetary Policy and Liquidity of the Bond Market—Evidence from the Chinese Local Government Bond Market," Mathematics, MDPI, vol. 13(16), pages 1-26, August.
    • Handle: RePEc:gam:jmathe:v:13:y:2025:i:16:p:2586-:d:1723199
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7390/13/16/2586/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7390/13/16/2586/
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jmathe:v:13:y:2025:i:16:p:2586-:d:1723199. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.