The Dissipating Credit Channel : Monetary Policy and Credit Bond Yields in China

This paper examines the impact of monetary policy shocks on credit bond yields in China. We find that, before 2014, a monetary policy loosening led to decreased bond yield dispersion, consistent with credit channel theory. However, after 2014, a substantial increase in bond yield dispersion occurred following a negative monetary policy shock, indicating reduced responsiveness among bonds with lower credit ratings during this period. Further analysis reveals significantly weaker responses among bonds rated below AA, particularly during periods of monetary easing