The Empirical Research Of SHIBOR Monetary Policy Transmission Effect

The benchmark interest rate plays an important role in the process of financial policy enforcement and asset allocation. The basic interest rate is in a key position and plays a leading role in the financial market, because many financial products, particularly fixed-income securities and financial derivatives need the basic interest rate as the pricing benchmark. In the reference to federal funds rate and LIBOR, SHIBOR was launched on 4th Jan.2007, and then it gradually became the benchmark interest rate in the financial market in China, meanwhile, SHIBOR acted as a key role in the monetary policy transmission mechanism.SHIBOR, as the intermediate target of monetary policy transmission mechanism, plays a key role in connection of central bank and financial market. Whether the money policy reform from quality to price-oriented could be successful, depends much on the performance of SHIBOR in the conduction of monetary policy. So it's meaningful to research the conduction effect of SHIBOR from the practical aspect and theory aspect.In this paper, the author will divide SHIBOR into two parts by SHIBOR3 M and analyst its conduction effects on the monetary policy transmission mechanism. First, examines how both of parts react with the change of instrument variable. And then research both parts separately. In the first part, the author will investigate the reflection of SHIBOR in money market, and research its prediction in stock market. In the second part, the author will research the conduction effects of SHIBOR in bond stock, and then investigate which real economy variables will react with the change of SHIBOR.The method of empirical analysis in the article are mainly used the Granger causality test as well as vector auto-regression model, impulse response and variance decomposition.Through the empirical analysis, we know that SHIBOR is sensitive to the change of monetary policy instrument variables, can better capture the policy information and liquidity signals, and convey it to the monetary market successfully. In the bond market, the monetary transmission mechanism based on SHIBOR operates through market anticipation. The empirical results indicate that the long-term SHIBOR interest rate system shows a strong ability to capture market expectations, and degree of influence of SHIBOR on changes of other interest rates in the bond market is more than 10%.In the stock market, because of its influencing factors are numerous and complicated, so the conduction of SHIBOR is weak. Conversely, as stock index implies market liquidity and policy meaning, so it guides the change of SHIBOR. As for real economy variables, the reaction of investment, responding on SHIBOR variation, is well compared with other variables. While, in a whole, the reflection of SHIBOR on real economy is weak.Finally, based on the empirical conclusions, combined with the current domestic and international situation, the author put forward to some proposals including the SHIBOR interest rate system enhancement and the construction of a mature financial market environment.