Analysis On The Risk Factors Of Advancing The Interest Rate Corridor In China

In the construction of China's economic and social modernization, finance has been playing an important role. With the pace of economic market reform, the financial sector also has a profound change. China's financial reform from the first of central banks' monetary policy function and the banking function, to the establishment of the interba nk market, open market operation policy, many varieties of term structure of interest rate products are introduced, and after the accession to the WTO, further opening up of the capital account, RMB joined the SDR, those are the process of financial reform which has made great achievements. Among them, interest rate, as an important means to adjust the speed and structure of the of the development of the national economy, has played an important role in the process of monetary policy transmission and economy regulation.The interest rate corridor mechanism is a kind of monetary policy control method, which is based on selecting the benchmark interest rate and determining the upper and lower boundary of the corridor to make the base rate running in the channel. In 1990 s, many world developed countries and some developing countries have implemented the monetary control policy of interest rate corridor, through a series of measures to maintain the stability of financial market. These reforms provide a useful re ference for the reform of interest rate market in C hina.This paper theoreticallyanalyzed the development of interest rate marketization of China, and talked various risks in the design of the interest rate corridor. Through from the benchmark interest rate fluctuations, external market impact and corridor width setting angle of theoretical and empirical analysis, the author found that, China's interest rate marketization rapid development, the money market interest rate volatility exist asymmetric GARCH effect. The interest rate risk premium which caused by negative information were overreacting.At the same time, VAR impulse response found that short-term capital market and foreign exchange caused stronger effect on the interest rate volatility than long-term market. By VAR variance decomposition, the author found the volatility from the foreign exchange market is also more significantly than other markets. Thus, the author thought that in the process of promoting the mechanism of interest rate corridor, the authority need to strengthen the development and monitoring of the benchmark interest rate, to research interest rate fluctuations and external market impact of channel width failure risk, and to do a good warning scheme in channel width regulation in certain circumstances.