Study On Improving SHIBOR As Money Market Benchmark Rates

Throughout the process of world interest rate marketization, the formation ofbenchmark interest rate is not only the key of both the interest rate marketization, but alsothe sign of succeeding in interest rate marketization. Many countries have graduallyreformed the country’s interest rate pricing system, improved the process of interest ratetransmission, and finally formed a system that choose the benchmark interest rate as itscore and keep the various interests interdependent between each other. As China’s futurebenchmark interest rate, SHIBOR, short for Shanghai Interbank Offered Rate, startedofficially on January4,2007. After six years of development, the operation of SHIBORmatures. Meanwhile, after the gradual adjustments in decades, the revolution of domesticinterest rate system is at the most critical moment. In the process, the majority of policiesfocused on the parts that financial system and interest rates system should contain, and lessinvolved in how to build a rate pricing theory. SHIBOR is not only the important part ofinterest rate system, but also an important monetary policy tool. At this point, how to buildan appropriate benchmark interest rate pricing model, and thus provide a reference in linewith market conditions for other interest rates, and ultimately improve the quality ofChina’s macro–control. This will have great influence on the process of marketization ofinterest rates and the economy’s healthy development; become urgent theoretical andtechnical problem for academics and policymakers. Therefore, this article will explain thetheory of interest rate management and the benchmark interest rate characteristics,comprehensively introduce the London interbank offered rate (LIBOR), the U.S. federalfunds rate (FFR), Shanghai interbank market peers lending rate (SHIBOR).And then thisarticle will make comparisons about the background and the pricing mechanism ofthem, analyzes their similarities and differences.Considering the successful appliance ofthe Taylor rule in guiding the U.S. federal funds rate pricing,the author advise that we canuse the Taylor Rule to predict the equilibrium interest rate as a reference for SHIBOR.As aresult,we can prevent unreasonable oscillation Caused by short-term factors.