Author(s)

Junfeng Yuan

Corresponding Author

Junfeng Yuan

Abstract

China's interest rate marketization reform is in full swing, and the determination and cultivation of benchmark interest rate is the most important thing at this stage. Bond pledge repo rate, shibor and interbank offered rate are all candidates with high voices. This paper uses Granger causality test, EGARCH model and other methods empirically study the relevant data of 2015.10-2018.12 in five aspects: market representation, benchmarking, volatility, policy controllability and economic relevance, and concludes that the 7-day bond pledge repo rate is the best choice for China's benchmark interest rate at this stage. Then it gives policy suggestions on how to further develop the bond repo market and improve the benchmark for repo rate.

Keywords

Interest Rate Marketization; Benchmark Interest Rate; Bond Pledge Repo Rate; Granger Causality; the EGARCH Model