What Drives China’s Interbank Market?
Electronic Access:
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Summary:
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.
Series:
Working Paper No. 09/189
Subject:
Asset prices Bank regulations Banking sector Bond markets Capital markets Central bank policy China Economic models Interest rates Interest rates on deposits Liquidity Monetary policy Pricing policy
English
Publication Date:
September 1, 2009
ISBN/ISSN:
9781451873368/1018-5941
Stock No:
WPIEA2009189
Format:
Paper
Pages:
30
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