The Empirical Analysis Of The Benchmark Interest Rate In Financial Market Of China

Benchmark interest rate lies in a basic position in the interest rate system, which depends on the whole fund supply and demand on the financial market. The choice of benchmark interest rate has very important practical significance, and previous scholars have done a lot of meaningful research.Because each kind of interest rate includes multiple deadline varieties, numerous researches have failed to get a consistent conclusion. The thesis mainly focuses on the choosing of benchmark interest rate for the short term, from the perspective of the entire yield curve. Firstly, extract characteristic indicators of the yield curve, level factor and steepness factor, with the method of principal component analysis (PCA). Level factor indicates the overall position of the yield curve, while steepness factor indicates the term structure of interest rates. Secondly, the thesis establishes a vector autoregressive(VAR) model of these two factors respectively and analyze the casual relationship among short-term interest rates. Finally, we come to the conclusion that from the perspective of the entire yield curve, Shanghai Interbank Offered Rate (Shibor) could act as the short-term benchmark interest rate after running for seven years. In addition, we measure benchmark degree of the inter-bank bond yield curve in the long term and it’s proved that it perfects well as the benchmark among those yield curves published by chinabond.com.Given that the authority of SHIBOR in practice is not fully recognized, we suggest keeping on nurturing SHIBOR as the benchmark in the money markets. Besides, enhance inter-bank bond trading market, improve the correlation among bonds, stocks and credit financing, in order to make the inter-bank bond yield curve bear the benchmark interest rate of all capital markets.