Study Of The Effectiveness About Shibor As The Benchmark Interest Rate

The interest rate marketing is a policy of long efforts to promote, and it is one of the core of the reform in the financial sector. In 1993,the Chinese Communist Party congress raised the resolution —"The Decision on Financial Reform".It decided to establish a market interest rate management system.In the system,all interest rates is decided by market capital supply and demand and the central bank benchmark interest rate is the core of regulation, at the same time Chinese financial markets would gradually get rid of the system of interest rates fully controled by the central bank. In the process of promoting interest rate marketing, fostering the benchmark interest rate absolutely based on the market has been an important breakthrough in the reform. People’s Bank of China since the 1990s began to establish a unified, standardized currency market, and tryed to cultivate the benchmark interest rate. In 2007, the People’s Bank of China launched Shanghai Interbank Offered Rate (Shibor), cultivating it as the benchmark interest rate. Its operation attracted wide attention. In recent years, market-based interest rate gradually accelerated. People’s Bank of China in 2013 canceled the lower limit lending rate of financial institutions.In 2015,it announced the commercial banks and rural cooperative financial institutions were no longer set the deposit rate floating limit. It indicates that China has basically liberalized interest rate controls, interest rate marketing will enter a new stage. Considering Shibor is the core of interest rate marketing reform, studying its operation and effectiveness as a benchmark interest rate is very meaningful and important for establishing a sound market interest rates appropriated to the formation and regulation mechanism and enhancing the effectiveness of the central bank regulation.In this paper, we compare Shibor with other money market interest rates and analyze descriptively Shibor’s operation and application in the fiancial market. On this basis, we conducted the empirical research about Shibor with other key interest rates in the money market, some important variables as well as stock markets and foreign exchange markets by correlation test, cointegration test, Granger causality test and VAR models. The empirical results show Shibor have a stronger guiding impact on other important currency market interest rates and a good correlation with M2 and other important indicators of economic, but the impact on he capital market and foreign exchange market is weak. So that shows Shibor as the benchmark interest rate is effective, but the transmission with the capital market and foreign exchange market need to be strengthened and improved.