Characteristics Of The Market Interest Rate System

This paper is focus on the characterize of the market interest rates, and the construction of the economic and econometric models. There are three relations in the market interest rates:1. The benchmark interest rate and the market interest rate. There exists some unsymmetrical relation between them by the economic model, and this unsymmetrical relation can be described by the unsymmetrical error correction model. Furthermore, Some significant evidence is found in the data of Chinese interest rate. The reason is the different money has no completely substitution.2. The relation between the different market interest rate which have the same maturity. The spread between the interbank rate and the repurchase rate is stationary random variable. But because the term premium is increasing by the maturity, the correlation of the two interest rates is decreasing by the maturity. At the same time, the paper indicate that the demand of money of security company and the special asset components of the business city bank can explain the interesting phenomenon: the 7 days interbank transaction and 7 days repurchase have the most volume.3. The long interest rate and short interest rate. First, applying the nonlinear cointegration model such as TAR, M-TAR, Hidden cointegration. And there exists hidden cointegration between Canadian interest rates, which means the Canadian Central bank is more sensitive when the long interest is decreasing than increasing. Second, using the data of Chinese, the unconditional expectation hypothesis and conditional expectation hypothesis are both rejected.At last ,the macroeconomic models embedded the different interest rates are discussed to understand how the monetary policy make a influence to the characterize of the interest rates.