| China is on the road to thoroughly interest rate liberalization. The basic prob-lem of interest rate liberalization is establishing a benchmark interest rate, which on one side reveals market liquidity,on the other side reacts quickly and correctly to monetary policy. Benchmark interest rate play an important role in asset pricing and monetary policy delivery, so research on benchmark interest rate is of impor-tance and it attracts many researchers. Central bank announced Shibor as Chinese benchmark interest rate in1,4,2007. Researchers convert their research from all the candidates for benchmark interest rate to the effectiveness of Shibor.Typical benchmark interest rate should be an risk-free interest rate, at least low risk interest rate. Moreover, it should be a interest rate that comes from market rather than from central bank, at last, it could be regulated by central bank. Barely research focus on testing whether interest rate satisfy these characters, which will be discussed in this thesis. The methods we use are OLS and Event Study. We not only analysize interest rate but also the volume. We conclude that Shibor do well both at adjusting according to monetary policy and reflecting the demand and supply of currency. We find that there is no obvious difference between Shibor and Repo in terms of market sensitiveness and controllability.Our contributions are as follows:First, we discuss whether it could be regulated by monetary policy and decided by market using reserve requirement ratio. Second, we find exchange rate could be used as a deputy for other economic factors. Third, we show the effect of monetary policy on the two interest rate through Event Study. Fourth, we match high frequency data of interest rate and low frequency data of reserve requirement ratio by control exchange rate and reserve requirement ratio. Fifth, we find what would happen when money supply change using OLS. Sixth,we focus on overnight data since the majority of trade are overnight trade. |
PDF Full Text Request