Performance Of Shibor As Financial Market Benchmark Interest Rate In China

This dissertation starts with discussion of the definition of benchmark interest rate, thenanalyzes Shibor’s performances as benchmark interest in four aspects, which in turn are, Shiborrate mechanism, past operating status，applications in financial products，pass-through ofmonetary policy. Study shows Shibor has a similar mechanism with the most influentialbenchmark rate in the world, Libor, which is a huge advantage as benchmark interest rate inChina. Analysis of data collected shows during the study period2007-2011, Shibor had beenoperating well. Even though there were three times of abnormal fluctuations due to themonetary market turmoil, there was no evidence to suggest that Shibor was to blame. Datashows Shibor has been widely referenced in financial products such as, floating rate debt,interest swap, and forward rate agreement. Analysis of correlation between Shibor rate andChina’s two main monetary policy tools, interest rate and required reserve ratio, shows thatthere is very good pass-through effect between Shibor rate and monetary policy. Aftercompleting analysis on the above four aspects of Shibor’s performance as benchmark interestrate, a comparison study among Shibor and its two main competitors, Chibor and interbankrepo rate is conducted in this dissertation. Study shows Shibor has already taken the leadingposition in the competition as China’s benchmark interest rate. Based on the data of the wholeyear2011, Shibor rates were slightly lower than its two competitors’, because Shibor ratesreflected the cost of money of the16biggest and most credible large banks in China. In theempirical analysis it is found that there were very good correlation among Shibor, Chibor andRepo, ShiborO/N, R001and IBO001Granger cause each other. Shibor1W and R007Grangercause each other. Shibor1W and BO007also Granger causes each other. Hence Shibor has beenaccepted as benchmark interest rate by the market. This has laid a good foundation for China’sinterest rate liberalization.