How the PBoC´s new MLF affects the yield curve

Makram El-Shagi and Lunan Jiang (lunan.jiang@vip.henu.edu.cn)
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Lunan Jiang: Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan

No 2023/1, CFDS Discussion Paper Series from Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China

Abstract: In this paper, we assess the impact of the Medium-term Lending Facility (MLF), an instrument recently introduced by the People's Bank of China (PBoC), on treasury and corporate bond yields. This instrument and, more specifically, the transmission of its use through treasury bond yields to corporate bond yields plays a major role in the more market-based policy the PBoC envisions for the future. Using a semi-parametric local projection framework, we show that the mechanism is already fairly effective, allowing the PBoC to manipulate the entire yield curve.

Keywords: Monetary policy; yield curves; MLF; Chinese bond market (search for similar items in EconPapers)
JEL-codes: E44 E52 G12 (search for similar items in EconPapers)
Date: 2023-02
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cna, nep-fmk and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:fds:dpaper:202301

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