Unconventional Monetary Policy and Bond Market Stability:Research on the Transmission Mechanism of Collateral Channel
Based on the microstructure of China's bond market and liquidity negative feedback loop theory,this paper uses the quasi-natural experiment of the People's Bank of China's policy of expanding the eligible as Medium-Term Lending Facility(MLF)collateral,as well as money market and bond market daily data,and uses the difference-in-difference model and the ARI-MAX model to explore the effectiveness and mechanism of collateral-based unconventional monetary policy tools in mitigating bond market risks and preventing the spread of downtrend.This paper finds that,on the one hand,the expansion policy can significantly reduce bond yields,boost the overall liquidity and activity of the bond market,and thus curb the"loss spi-ral"under the negative feedback mechanism.On the other hand,the implementation of the ex-pansion policy has also promoted the downward transmission of macro liquidity,optimized the total amount and structure of liquidity in the bond market,and curbed the spread of the"margin spiral"under the negative feedback mechanism.This conclusion explains the connotation logic of unconventional monetary policy tools to stabilize the financial market under the background of the"sinicization"system,and adds empirical evidence of the transmission of financial market channels.The conclusion of this paper also brings some enlightenment:as the last liquidity pro-vider of the market,the People's Bank of China should make full use of the accuracy and effi-ciency of collateral-based unconventional monetary policy tools in mitigating specific local risks,and better stabilize the market by flexibly adjusting the pledge rate.
CollateralUnconventional Monetary PolicyBond Market MicrostructureMechanism of Transmission
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