Research on the Impact of Economic Policy Uncertainty on Short Term Interest Rate Fluctuations

Research has shown that economic policy uncertainty is widespread. This article selects the Economic Policy Uncertainty Index, SHIBOR, and CHIBOR as proxy indicators for China's economic policy uncertainty and short-term interest rates. From 2006 to 2023, the MS-VAR model is used to explore the dynamic impact mechanism of economic policy uncertainty on short-term interest rate fluctuations. Research has found that the impact of economic policy uncertainty on short-term interest rate fluctuations is "widespread" and may have an impact on several major short-term interest rate fluctuations; When economic policy uncertainty increases, several major short-term interest rates may decline, and the magnitude of the decline in interest rates with longer maturities is relatively greater. The phenomenon of positive feedback effects is also more evident in times of crisis; In the stage where the national economic development tends to be stable and economic policy expectations are relatively clear, the impact of economic policy uncertainty on short-term interest rate fluctuations is more easily absorbed by economic entities.