An Analysis Of Shibor’s Benchmark Role Based On Anchoring Effect

On Oct.23,2015,People’s Bank of China announced the call-off of the upper limit of deposit interest rate,which is a remarkable step of Chinese interest rate liberalization reform.However,it does not mean the finish of the interest rate reform.To boost interest rate liberalization,an ideal benchmark interest rate system is significant.In recent years,Chinese Central Bank has promoted Shibor as the benchmark interest rate.It remains to be further studied whether Shibor plays the role of the benchmark interest rate indeed.Most of the previous studies analyze the question according to the definition and features of benchmark interest rate.In this paper,I innovatively worked out the question from the perspective of Anchoring Effect and market psychology.With the help of anchoring theory,I established three hypotheses.H1: Shibor is the interest rate anchor of China’s financial market and plays the role of benchmark interest rate.H2: Shibor has both long-term and short-term anchoring effect.H3: Shibor has both high and low anchoring effect.In order to test the above hypotheses,this paper processed the original data through BP filtering,and established VAR models with different groups of variables.Then,this paper draw conclusions by comparing the outcomes of Granger causality test,impulse response and variance decomposition.The main conclusions are showed as follows.First,Shibor is qualified as interest rate anchor in Chinese financial market and Shibor(weekly)are the best one among the short-term Shibor types(daily,weekly and biweekly).Second,Shibor has both longterm and short-term anchoring effect.Nevertheless,short-term anchoring effect is stronger than the long-term one.Third,Shibor has both high and low anchoring effect.But the high anchor plays a stronger effect than the low anchor.After the whole study,five suggestions are put forward to enhance the basic role of Shibor.Firstly,improve the quotation mechanism of Shibor.Secondly,strengthen the reform of interbank lending market.Thirdly,urge more financial products to peg themselves to Shibor.Fourthly,develop derivative products of major market interest rates.Lastly,unclog the interest rate transmission channel for monetary policy by using the high and low anchor of Shibor properly.