Study On The Cross-market Effects Of China’s Short-term Interest Rate Dynamic Fluctuation

June1,1996, the People’s Bank of China unlocked the Inter-bank Offered Rates,this move was regarded the breach of the market-based reform of interest rates inChina. Since then, the management of the interest rate in our country started fromdirect control to indirect control step by step, leaving the decisions of interest rates tothe market. Interest rate is the most important price variables in financialmarkets,among interest rate systemsof various term structures, the short-term interestrate occupies a very important position, it is an indicator of money market funds flow,financial asset pricing benchmark, and important indicators for investors to invest. Inmonetary markets, due to the impact of information and the rapid flow of funds, as themonetary market prices, short-term interest rates also changes frequently, its volatilityis a sign of changes in market supply and demand, also a barometer of financialmarkets.In our country, as theimprovement of son’s financial market’s relevance,dynamic fluctuations in short-term interest rates tend to overflow from the moneymarket to other markets, a phenomenon that a sharp price fluctuations of one marketresults in the other market following happens, and even can lead to the dynamic chainreaction of the whole financial market. Therefore, the impact of interest rate changesto stock market and bond market is one of the problems the domestic and foreignacademic circles and government management focuses.This paper was committed to using econometric model to explore the cross-market effects of the short-term interest rates’ dynamic fluctuations in China.On thisissue, this paper makes the mainly two contributions: Firstly, as far as the researchperspective, the study on the cross-market includes the main financial marketsegments: stock market, the Treasury market and Enterprise bond market, thecross-market effects are divided into mean spillover effect, volatility spillover effectand investment transfer effect. This is the first investigation into the cross-marketeffects caused by dynamic fluctuation in China’s short-term interest.This paper arrives at the following4conclusions: Firstly, China’s Short-termInterest Rate Changes impose weak negative spillover effects on the stock market, butthe effect on the Treasury and Enterprise bond market is not significant. China’sShort-term Interest Rate Changes impose significant positive volatility spillover effecton the Treasury market and the Enterprise bond market, but the effect on stock marketis not significant. Being affected by the fluctuations of the short-term interest rates inour country, there are investment transfers of different levels between stock and theTeasury market, between stock andthe enterprise bond market. However, there is noinvestment transfer between the Treasury market and the enterprise bond market...