Research On The Structure And Efficiency Of China’s Inter-bank Market

The interbank market is the core of the financial system.Domestic research on this market mainly focuses on the selection and evaluation of benchmark interest rates,the definition and measurement of liquidity,and the identification and prevention of systemic risk,etc.More basic research,such as the price determination of inter-bank market,the micro characteristics and formation process of market structure,are rarely discussed.Starting from the transaction behavior of inter-bank market subjects under information asymmetry,this paper deduces the decision model of capital equilibrium price based on the principle of rational expectation equilibrium,and discusses the formation mechanism of market structure,which has important theoretical significance to supplement the domestic research in this field.Based on the interaction of transaction subjects in the inter-bank market under asymmetric information,this paper focuses on two closely related theoretical issues,and analyzes the impact of bank transaction strategies on the transaction structure of the inter-bank market under the condition of asymmetric information,as well as the equilibrium price of the inter-bank decentralized market.On the one hand,bank heterogeneity and differences in financing constraints have become important factors affecting trading decisions,and the tendentious trading behavior caused by trading decisions affects the microstructure of the market.On the other hand,it demonstrates the realization path of inter-bank decentralized market equilibrium under asymmetric information,and further deduces the condition mechanism of redundancy in public information.Based on the above two theoretical problems,it is analyzed that under the specific transaction mechanism,the bank transaction behavior forms a certain market structure in the process of price determination,and under a certain market structure,it affects the market equilibrium.On the basis of theory,empirical research is carried out.Firstly,after widely combing and summarizing the structural characteristics of foreign interbank market,starting with the available domestic interbank market data,statistical and visual charts are used to present the structural characteristics of China’s interbank market.Then,the benchmark interest rate in the inter-bank market is not only the representative of the equilibrium price at the macro level,but also depicts the characteristics of the term structure of the market from the time dimension.The empirical research analyzes the characteristics and determinants of the term structure of interest rate in the inter-bank market based on the expansion model of rational expectation and interest rate parity theory.Secondly,through panel empirical analysis,this paper analyzes the determinants of the equilibrium price in the interbank deposit market,and tests the decisive role of public information on the transaction equilibrium price.Finally,the theoretical model of inter-bank interest rate determination assumes that bank liquidity is an exogenous random variable,and the empirical study further discusses the relationship between inter-bank market transactions,interest rate marketization and bank liquidity creation.The main conclusions of this paper are as follows:The theoretical model deduces that under the premise of private information and no transaction cost,there will be redundancy in the public information related to private information in the inter-bank market;When transaction costs exist,public information related to private information can improve the information asymmetry of the market.It is found that in the interbank deposit market with transaction costs,public information such as benchmark interest rate can still provide effective information for deposit banks,and the market-oriented role of different benchmark interest rates is different.Bank individual characteristics and transaction frequency will have a significant impact on the daily deposit interest rate,but there are significant differences in the signals transmitted by different types of banks to the market under the same transaction frequency.The market structure model demonstrates the impact of transaction decisions of large and small banks on the formation of market structure under the condition of information asymmetry,which is helpful to explain the characteristics of "center periphery" network structure prevalent in the inter-bank market at home and abroad.The network structure characteristics of China’s inter-bank market depicted by statistical and visual charts can support the results of theoretical derivation.The empirical results show that the rational expectation theory plays a significant role in the determination of the term structure of the benchmark interest rate,while the interest rate parity theory has insufficient explanation.Considering the function of domestic shadow banking business,this paper constructs a bank liquidity creation index in line with the characteristics of China’s financial system.It is empirically found that the benchmark interest rate of the inter-bank market will have a significant impact on bank liquidity creation,and the marketization of interest rate helps banks offset some of the impact of price based monetary policies such as loan benchmark interest rate through independent pricing.In addition,the development of Internet finance has significantly promoted the liquidity creation of small and medium-sized banks such as urban commercial banks and rural commercial banks,while state-owned banks and jointstock banks are more vulnerable to their own capital adequacy ratio.The empirical results support the "risk absorption hypothesis".Loose quantitative monetary policy still has a significant positive effect on the creation of bank liquidity,while the effective transmission of price monetary policy is still concentrated in the inter-bank market.Under the background of foreign IBOR benchmark interest rate reform,through the theoretical analysis of the principles of regulatory policy economics,and according to theoretical and empirical research,this paper puts forward policy suggestions on Perfecting China’s benchmark interest rate system and market-oriented system and refining prudential supervision.