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What Drives China’s Interbank Market?
Author:
Mr. Nathan Porter
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Ms. TengTeng Xu
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https://orcid.org/0000-0002-2853-283X
Series:
IMF Working Papers
Volume/Issue:
Volume 2009: Issue 189
Language:
English
Publication Date:
01 Sep 2009
DOI:
https://doi.org/10.5089/9781451873368.001
ISBN:
9781451873368
ISSN:
1018-5941
Pages:
30
Keywords:
WP; monetary policy; benchmark interest rate
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Interest rates in China comprise a mix of both market determined interest rates (interbank rates and bond yields), and regulated interest rates (lending and deposit rates), reflecting China's gradual process of interest rate liberalization. We argue, using a theoretical model and empirical analysis, that the regulation of key retail interest rates diminishes the ability of the market determined rates to act as independent price signals, or as benchmarks for use in asset pricing and monetary policy. Further interest rate liberalization should, therefore, strengthen the information conveyed by movements in interest rates, allowing for the better pricing of risk and capital.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund