Empirical Research On The Influencing Factors Of Inter-bank Offered Rate Volatility Based On The GARCH-MIDAS Model

The volatility of inter-bank offered rate reflects the price change of loan capital in the money market.It is the pivot connecting the real economy and the market economy,and its volatility will affect the development of the entire financial market.Therefore,studying the influencing factors of inter-bank offered rate volatility is of great significance to promoting China’s economic development.This paper briefly describes the development of inter-bank offered market and the changes of inter-bank offered rate in recent years,and theoretically analyses the influencing factors of inter-bank offered rate volatility.Specifically,this paper analyses the mechanism of the volatility of inter-bank offered rate from the perspectives of the intention of the central bank’s monetary policy,the supply and demand of money in the money market and alternative financing channels.On this basis,this paper uses the generalized autoregressive conditional heteroscedastic mixing data sampling model(GARCH-MIDAS)to analyze the impact of macroeconomic variables on inter-bank offered rate volatility,and constructs the level effect and volatility effect of single and multi-factor variables respectively.The empirical results show that the significant impact on inter-bank offered rate volatility is the money market supply and demand and alternative financing channels,followed by the central bank’s monetary policy.Firstly,the estimation results of the single-factor level effect model show that the increase of money supply and the level of deposit-loan ratio will stabilize the inter-bank offered rate and reduce its volatility,while the increase of the statutory deposit reserve rate,consumer price index,rediscount rate,inter-bank mortgage repurchase rate and exchange rate level will increase the volatility of inter-bank offered rate.From the estimation results of the single-factor volatility effect model,the volatility of money supply and exchange rate has no significant effect on the volatility of inter-bank offered rate,and other explanatory variables are significant.Among them,the increase of consumer price index,rediscount rate,statutory deposit reserve rate and inter-bank mortgage repurchase rate volatility will aggravate the volatility of inter-bank offered rate,and the increase of deposit-loan ratio volatility will make the inter-bank offered rate tend to a relatively stable range.Secondly,in the estimation results of the single-factor GARCH-MIDAS model,it can be found that the effect of the consumer price index and the inter-bank mortgage repurchase rate based on the level effect on the volatility of the inter-bank offered rate is stronger than the volatility effect,while the volatility effects of deposit-loan ratio,rediscount rate and statutory deposit reserve rate are stronger than that of level effect.In addition to building a single-factor GARCH-MIDAS model,this paper also builds a double-factor and multi-factor GARCH-MIDAS model to compare.The results are similar to the estimation results of the single factor model.Except for the changes in the number and significance level,most of the correlations between the inter-bank offered rate volatility have not changed significantly,which is verified to some extent.Finally,this paper also uses GARCH-MIDAS model to predict the volatility of inter-bank offered rate.Through the RMSE value of root mean square error inside and outside the sample and the H value of posteriori test ratio,the prediction effect of the model is tested.It is found that the prediction results of the volatility effect of both single-factor model and multi-factor model are better than that of the level effect.According to the results of empirical research,combined with China’s actual national conditions,this paper proposes some policy suggestions from the government level and the bank level,including: improving the market operation environment of inter-bank offered rate;giving full play to the practical role of inter-bank offered rate in the market,;perfecting the quotation mechanism of Shanghai inter-bank offered rate,improving the supervision of inter-bank offered market;and improving the quality,authenticity and accuracy of quoting banks.