TY  - JOUR
AU  - Song, Zhiming
AU  - Zhao, Chengzhi
PY  - 2026
DA  - 2026/10/23
TI  - Short-Term Impact of China's Reverse Repo Operations on the Overnight Shibor: Evidence from the Money Market
JO  - Journal of Social Systems and Policy Analysis
T2  - Journal of Social Systems and Policy Analysis
JF  - Journal of Social Systems and Policy Analysis
VL  - 3
IS  - 4
SP  - 184
EP  - 193
DO  - 10.62762/JSSPA.2025.210231
UR  - https://www.icck.org/article/abs/JSSPA.2025.210231
KW  - Reverse repo operations
KW  - overnight Shibor
KW  - market expectations
KW  - event study
KW  - short-term monetary policy transmission
AB  - Based on daily data from China's money market between March and April 2025, this study investigates the short-term effects of the People's Bank of China's (PBC) reverse repo operations on the overnight interbank rate (O/N Shibor). Using Ordinary Least Squares (OLS) regression and an event-study approach, the analysis explores both the quantity-based and price-based transmission mechanisms of monetary policy. Empirical results indicate that an increase in the reverse repo amount significantly reduces the overnight rate at the 5% level, confirming the liquidity-supply channel of quantitative policy and demonstrating that liquidity injections effectively ease short-term funding costs. The reverse repo rate exerts a positive but statistically insignificant influence, suggesting that while its price signal aligns with theoretical expectations, its short-term transmission remains limited. The one-week Shibor has a strong and significant positive impact on the overnight rate, highlighting the dominant role of market expectations. Overall, the findings suggest a three-stage transmission chain-liquidity adjustment, market expectations, and rate response-where reverse repo operations mainly function as a liquidity-relief mechanism shaped by expectation dynamics rather than a direct policy shock.
SN  - 3068-5540
PB  - Institute of Central Computation and Knowledge
LA  - English
ER  - 

@article{Song2026ShortTerm,
  author = {Zhiming Song and Chengzhi Zhao},
  title = {Short-Term Impact of China's Reverse Repo Operations on the Overnight Shibor: Evidence from the Money Market},
  journal = {Journal of Social Systems and Policy Analysis},
  year = {2026},
  volume = {3},
  number = {4},
  pages = {184-193},
  doi = {10.62762/JSSPA.2025.210231},
  url = {https://www.icck.org/article/abs/JSSPA.2025.210231},
  abstract = {Based on daily data from China's money market between March and April 2025, this study investigates the short-term effects of the People's Bank of China's (PBC) reverse repo operations on the overnight interbank rate (O/N Shibor). Using Ordinary Least Squares (OLS) regression and an event-study approach, the analysis explores both the quantity-based and price-based transmission mechanisms of monetary policy. Empirical results indicate that an increase in the reverse repo amount significantly reduces the overnight rate at the 5\% level, confirming the liquidity-supply channel of quantitative policy and demonstrating that liquidity injections effectively ease short-term funding costs. The reverse repo rate exerts a positive but statistically insignificant influence, suggesting that while its price signal aligns with theoretical expectations, its short-term transmission remains limited. The one-week Shibor has a strong and significant positive impact on the overnight rate, highlighting the dominant role of market expectations. Overall, the findings suggest a three-stage transmission chain-liquidity adjustment, market expectations, and rate response-where reverse repo operations mainly function as a liquidity-relief mechanism shaped by expectation dynamics rather than a direct policy shock.},
  keywords = {Reverse repo operations, overnight Shibor, market expectations, event study, short-term monetary policy transmission},
  issn = {3068-5540},
  publisher = {Institute of Central Computation and Knowledge}
}