Study On The Feasibility Of The SHIBOR As A Benchmark Interest Rate

With the deepening of financial reform, the wave of interest rate liberalization is more and more strength. The pace of interest rate liberalization is steadily. The selection and cultivation of the benchmark interest rate is very important to interest rate liberalization, which is not only related to the development of financial markets and the pricing of financial products, but also an important foundation for transformation of China’s monetary policy from quantity to price.The central bank officially launched Shanghai Interbank Offered Rate (SHIBOR) since January 2007, wishing it developed into China’s money market benchmark interest rate. SHIBOR has been widely recognized by the market, with its price-based floating rate debt, interest rate swaps, forward rate agreements and other financial derivatives issuance volume have increased rapidly. Non-financial institutions and individuals awareness SHIBOR is also rising. But SHIBOR has run six years, whether it has already reached the requirements of the benchmark interest rate? With previous studies on the benchmark interest rate, This papar make a distinction between the central bank benchmark interest rate and the market benchmark interest rate.The central bank benchmark interest rate should be a specific interest rate of the market benchmark interest rate system.To meet the market benchmark interest rate,a interest rate should has the nature of marketing and foundation. But if it want to be the central bank benchmark interest rate,it need to meet three attributes:fiuctuations reasonable, monetary policy controllable and macroeconomic relevance. Then through qualitative analysis and quantitative analysis methods. This papar use GRANGER causal analysis and establish EARCH model to compute SHIBOR from the market,fundamental,volatility,controllability, relevance. This paper argues that SHIBOR has basically met the requirements of the market benchmark interest rate, especially short-term SHIBOR.But it need further nurturing on the volatility rational policy controllability, and economic relevance these three attributes.Why does SHIBOR have not become the benchmark interest rate?On the one hand, the China’s current two-tier interest and market segmentation resulting two-track blocked the rate transmission channels among SHIBOR to the capital markets, debt markets and macroeconomic. On the other hand,the mechanisms in the quote of SHIBOR need to be perfected. The last but not the important, China’s financial markets is not maturity,and innovation and transactions of financial products underdeveloped, SHIBOR application is still not broad enough,and it can not support SHIBOR benchmark position enough.