This paper analyzes the joint dynamic processes of macroeconomic and monetary variables and bond yields in China. We show that macroeconomic variables as well as monetary policy variables have a significant impact on two factors that capture the variation in yields. An increase in the inflation...

China's interest rate market is unique because its central bank sets a term structure of official interest rates on bank deposits and loans as well as money supply. In this paper we explore both theoretically and empirically how market interest rates in China are related to economic...