What Drives Chinaâ€™s Interbank Market?
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.
|Date of creation:||01 Sep 2009|
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- Alessandro Prati & Leonardo Bartolini & Giuseppe Bertola, 2001.
"The overnight interbank market: evidence from the G-7 and the Euro zone,"
135, Federal Reserve Bank of New York.
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- Bartolini, Leonardo & Bertola, Giuseppe & Prati, Alessandro, 2002. "The Overnight Interbank Market: Evidence from the G7 and the Euro Zone," CEPR Discussion Papers 3090, C.E.P.R. Discussion Papers.
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"Banks' reserve management, transaction costs, and the timing of Federal Reserve intervention,"
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Elsevier, vol. 25(7), pages 1287-1317, July.
- Leonardo Bartolini & Giuseppe Bertoli & Alessandro Prati, 2000. "Banks' Reserve Management, Transaction Costs, and the Timing of Federal Reserve Intervention," Econometric Society World Congress 2000 Contributed Papers 0123, Econometric Society.
- Moschitz, Julius, 2004. "The determinants of the overnight interest rate in the euro area," Working Paper Series 0393, European Central Bank.
- Hamilton, James D, 1996. "The Daily Market for Federal Funds," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 26-56, February.
- Engle, Robert, 2002. "Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 339-50, July.
- Tarhan Feyzioglu & Nathan Porter & ElÃ¶d TakÃ¡ts, 2009. "Interest Rate Liberalization in China," IMF Working Papers 09/171, International Monetary Fund.
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