The Influence Mechanism of Standing Lending Facility Rate and Reverse Repo Weighted Interest Rate on Money Market Interest Rate
- YUAN Huiping, WU Mingzhou & LIU Tangyong
- Xiamen University, 361005.
Based on the average legal reserve system of China, the paper analyzes the influence of the standing lending facility and the reverse repo operation of the central bank on the interest rate of the money market with the theoretical model and the empirical results. We find that: (1) the rise of the reverse repo weighted interest rate which is calculated by reverse repurchase rates in different periods according to the amounts has a positive effect on money market rates; (2) The impact of standing lending facility and reverse repo weighted interest rate adjustment on money market rate shows time-varying characteristics due to the individual liquidity level of the bank and the probability of the central bank to carry out the reverse repo；(3) The impact of the reserve repo weighted interest rate on the money market rate is about 50%, and the impact of the standing lending facilities is weaker than the reverse repo, but as the number of the standing lending facilities applications grows, the impact of the standing lending facilities increases (4) Compared with the interbank pledged repo weighted interest rate and the Shanghai Interbank Offered Rate, the overnight deposit pledged repo interest rate ensures smoother transmission of monetary policy, so it can be used as the target of the interest rate operation of the central bank.
- Reverse Repo Weighted Interest Rate, Standing Lending Facility, Money Market Interest Rate, Timevarying Parameter