Determinants of interbank rate in money market: a comparison between UK and China

Zhang, Jun (2012) Determinants of interbank rate in money market: a comparison between UK and China. [Dissertation (University of Nottingham only)] (Unpublished)

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Since 2007, the financial crisis and the credit crunch had a big impact in the global world on the money markets. Most money market rates rose rapidly and became unstable such as London Interbank Offered Rate (LIBOR). Most central banks and governments made some series of monetary policies to control and affect their money market rates. Moreover, a number of papers documented and concluded the close relationship between some monetary factors and money market rates. These factors were used as intermediary instruments by central banks to control and affect money markets. However, there was no analysis about the detailed relationship and strength between them. And there was no comparison about different money markets. Which factors were the efficient instruments to transmit the central banks’ expectations of money market rates was valuable to figure out. In different money markets, those factors were same or different to the money market rates.

This dissertation chose two of the world’s most powerful economies. One is the UK which is one of the oldest and strongest developed countries. The other is the China which is the younger and fast economic developing countries. There must be some similarities and differences in their money markets and monetary policies. This dissertation used OLS method to estimate time series regression for analysing the relationship between the interbank rate and its determinants. This dissertation selected the observations for the time period from 2007 to 2011 which is the global financial crisis. Finally, this dissertation found that official central-bank benchmark rate was a significant and powerful factor to determine and affect the interbank rate in both UK and China. Furthermore, UK’s money market was more independent than China’s money market. There were less factors to determine and affect the UK’s interbank rate (LIBOR) than the China’ interbank rate (SHIBOR). In the future, the central banks not only intervene in their money markets at some special time but also keep their money markets’ independence at most usual time. Thus, the money markets will have a positive and healthy development. Therefore, China has a long way to pass in financial system and monetary policy compared with UK.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 08 Apr 2013 12:02
Last Modified: 16 Feb 2018 04:58

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