A Study on the Impact of US Monetary Policy Shocks on China's National Debt Yields
In the framework of modern monetary policy,national debt yields are a crucial variable in the transmission mechanism.This paper employs an affine term structure model to decompose China's national debt yields and examines the cross-border spillover effects and transmission channels of the Federal Reserve monetary policy shocks on these yields.This paper finds that the Federal Reserve's forward guidance primarily exerts significant spillover effects on the risk-neutral rate in the bond market through the signaling channel.In contrast,the unexpected shocks of conventional mon-etary policy are transmitted through both the expectation channel and the risk-taking channel.Additionally,the exchange rate channel introduces heterogeneity in the impact on national debt yields.Before the"8·11"exchange rate reform,the risk-taking channel was predominant,with the term premium of yields being negatively affected by the Federal Reserve's unex-pected monetary policy shocks.After the reform,the portfolio rebalancing channel hedged the effects of the risk-taking chan-nel,thereby weakening the overall impact of these shocks on China's national debt markets.Therefore,this paper suggests that China should enhance the management of monetary policy expectations,steadily advance the market-oriented reform of the ex-change rate,and improve mechanisms for identifying,warning,and responding to cross-border financial risks.Compared to existing research,this paper offers several contributions.Firstly,by employing an affine term structure model combined with high-frequency data to decompose China's national debt yields,the paper addresses the scarcity of domestic lit-erature on spillover mechanisms and contrast the effects of conventional and unconventional monetary policy shocks.Secondly,this paper uses futures data to study the expected and unexpected shocks of the Federal Reserve's conventional monetary policy and forward guidance within a unified framework.Additionally,it clarifies the specific implications of forward guidance indicators for the first time in domestic literature.Thirdly,this paper investigates the heterogeneity in the transmission mecha-nisms of the Federal Reserve monetary policy shocks before and after the"8·11"exchange rate reform.
the Federal ReserveMonetary Policy ShocksNational Debt YieldSpillover EffectsSpillover Channels
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