The Study Of Coupling Effects Between SHIBOR And Repo Rate

The new normal of China economy emphasizes the decisive role of the market. With the advancement of interest rate marketization reform, the discus s about the monetary policy regulation changing from quantitative monetary p olicy to the pricing monetary policy has become a hot issue in finance resear ch. Since 1998, China always adopt quantitative monetary policy regulation m ode. Quantitative monetary policy takes money supply as intermediate target, and takes monetary base as operational target. Presently, compared to the dep osit reserve ratio and rediscount interest rate, open market operations which r egard sell repo and reverse repo as main methods has become People’s Bank of China’s primary tool of monetary policy. But with the development of int erest rate liberalization, the pricing monetary policy has become an inevitable choice of history. Moreover, the pricing monetary policy regulation mode wh ich takes interest rates as intermediate target has become’the direction of the evolution of China’s monetary policy.The pricing monetary policy is a monetary policy means which regard interest rate and exchange rate as the policy means and regard the changes in asset prices, the financial income and cost forecasts of microscopic main body as the control target. It’s the monetary policy means which is indirect between central bank and the people. If you want to realize the transition of monetary policy price model, people need not only take the long-term interest as intermediate target, but also have effective benchmark interest rate as operational target. However, China can’t control the benchmark interest rate directly now. So we need control the related interest rate (which have absolute influence on SHIBOR) to control the benchmark interest rate indirectly. In terms of the federal reserve, they take the expected real interest rate as intermediate target and take federal fund rate as operational target. What’s more, federal reserve also try to affect repo rate by open market operation to control federal fund rate indirectly. We China really can take example by federal reserve on the way of realizing the transition of monetary policy.At the same time, the benchmark interest rate makes the financial markets play a role of benchmark function, which is the pricing foundation of other rates and financial assets. When central bank conducts the monetary policy operation, it mainly affect the benchmark interest rate by monetary policy tools. Then change all the interest rate system by changing the benchmark interest rate and then affect investment, consumption, the level of financial asset price. Finally realize the regulation and control of entire economy. Since 2007, our country has been greatly cultivate Shanghai interbank offered rate (SHIBOR) as the benchmark interest rate. It’s the foundation of construction of benchmark interest rate system and the market-oriented interest rate reform. It’s also the assurance of monetary policy transition. Under the great support of the central bank, the development of SHIBOR is very rapid and the market influence has been approved greatly. Now it has already can reflect capital cost, capital supply and demand, the expected of monetary policy nicely. Moreover, it has gradually developed into the important index of finance system in our country interest rate system. From the aspects of the formation mechanism, area where it would be helpful and integrity, SHIBOR has the conditions of becoming the market benchmark interest rate. Thus, gradual development and perfection of SHIBOR are the foundation of price monetary policy mode transition. On the other hand, at the present stage, the mainly methods of al bank’s open market operations in China are positive repurchase and reverse repurchase. At the same time, the scale of inter-bank borrowing maintains at low level. The development of interbank market is much lower than bond repurchase market. As a result, the repo rate has developed to become something like benchmark interest rate which decrease the effect of SHIBOR. So the dispute of single benchmark interest rate or double benchmark interest rate comes into being. And discussion of this paper can effectively solve the dispute.If the effective linkage effect exist between repo rate and SHIBOR, then the central bank can control the repo rate effectively through positive repurchase and reverse repurchase, and transmit to SHIBOR, realizing the effective control of SHIBOR. Moreover, effect long-term rate through the effective control of SHIBOR, which changes the whole interest rate system. Then change the investment, consumption and asset price and finally effect the gross output. Therefore, the existence of linkage effective between SHIBOR and repo rate is of great significance. It can not only answer the dispute about single benchmark interest rate or double the benchmark interest rate above, but also verify the price of the effectiveness of monetary policy in China.Firstly, this paper makes statistical description of benchmark interest rate and the repurchase rate in China, verifying the existence of linkage effective between SHIBOR and repo rate. Secondly, the authors collected active daily data of seven-day inter-bank bond pledged repo rate and seven-day SHIBOR from January 4,2007 to April 3,2015, by establishing VAR model and making Granger causality detection, Impulse Response Analysis and Variance Decompositions, the author concluded that the repo rate has a great impact on SHIBOR, but the reverse influence is weaker, which confirmed the existence of transitive relations between the inter-bank offered market and the inter-bank bond repo market.