The Impact Of Interest Rate Liberalization On Financial Stability And Macro Economy

This paper deals with the impact of interest rate liberalization on financial stability and macro economy.China started the interest rate liberalization from 1996.And the same time,China has started SHIBOR and strengthened its position in the money market interest rate system gradually.After more than 20 years of exploration,now China no longer control the lending rates and fixed deposit(more than one-year).China launched a long-awaited deposit insurance system on May 2015,and the People's Bank of China allowed the issue of large-denomination certificates of deposit to individuals and companies on June 2015,a key step forward in interest rate liberalization.Overall,non market factors still exist,which is the key factor restricting the effectiveness of interest rate policy.At present,improving the effectiveness of interest rate policy and the monetary policy is effective:firstly,interest rate liberalization is conducive to play an important role in the allocation of financial resources in the interest rate.Secondly,interest rate liberalization forced commercial banks to speed up financial innovation,changing the operating mode.Thirdly,interest rate liberalization is conducive to the interest rate transmission mechanism of monetary policy implementation of the dredging,macro control and market indirect.Fourthly,interest rate liberalization can alleviate the financing of small and medium-sized enterprises in the certain degree,and the resulting social employment problem.Fifthly,interest rate liberalization further standardize and guide the healthy development of private financing,private lending.Therefore,further promote market-oriented interest rate reform,is also an important measure to guide the healthy development of private financing.However,will the interest rate liberalization increase the risk of financial stability?Will the interest rate liberalization exert an important influence on the stability of the macro economy?How does interest rate liberalization influence economic growth?There are still large differences in the current views.From the domestic research,the effects of interest rate policy in theory and practice mainly focus on the stage of controlled interest rate,these studies are needed in certain extent,but the focus should be the problem of how interest rate liberalization influences financial stability and the macro economy,especially the effect of the central bank monetary policy conduction mechanism.This paper consists of seven chapters:Chapter I:Introduction.This chapter mainly explains the background,research significance,research status,research object,and research route,also including the innovation and the deficiency in the paper.Chapter II:General Theory.From the view of theoretical foundation,mainly introduces the interest rate decision theory,financial deepening theory,theory of financial restriction,interest rate transmission mechanism theory,theory of financial fragility etc.The theory explains the current shortcomings of the interest rate control in China and the necessity of the liberalization of interest rate and positive significance,and in the interest rate liberalization,and how to make the impact of interest rate liberalization on financial stability to a minimum,and how to play the positive role of market-oriented interest rate increase long on the economy.Chapter III:The international experience.Through to these interest rate liberalization experience,after the interest rate liberalization,most countries have appeared financing structure change,the short term bank risk improvement and deterioration in asset quality risk,these countries usually take the gradual principle to promote market-oriented interest rate,and take the establishment the deposit insurance system,strengthen the breadth and depth of the regulatory and financial market development measures.Chapter?:The impact of interest rate liberalization on financial stability.This chapter firstly analyzes the interest rate market challenges to financial stability,clarifies the relationship between interest rate liberalization and financial stability.At the basis of study on the impact of interest rate liberalization on the efficiency of commercial banks,commercial banks and the impact on price competition and risk behavior,and use the method of pressure test analysis of the liberalization of interest rate faced by Chinese commercial banks is a high pressure.And then discusses the impact of interest rate liberalization on non bank finance,including the effect of financing structure,the impact on financial markets,and the non bank financial institutions etc..Chapter V:The impact of interest rate liberalization on the entity economy.In this chapter,we analyze the impact of interest rate liberalization on enterprises,different industries and residents,and then analyze the impact of interest rate liberalization from two aspects:firstly,based on panel data model to analyze the impact on corporate financing.Secondly,based on the dynamic stochastic general equilibrium(DSGE)model,the analysis of the impact of interest rates on the simulation of output and inflation in China.Finally,based on the conclusions of empirical analysis,this chapter gives the policy suggestions on how to further support the development of the real economy in the context of the interest rate liberalization market.ChapterVI:The impact of interest rate liberalization on macro economy.In this chapter,we analyze the impact of interest rate liberalization on economic growth and price level based on the impact of interest rate liberalization on consumption and investment.First,in the analysis of the dynamic relationship between interest rate market and economic growth,the financial deepening model and the three variable causality model are used to examine the impact of interest rate liberalization on financial deepening,as well as whether financial deepening will promote economic growth.It analyzes the impact on inflation by using the nonlinear model.Finally,it analyzes the risk of the interest rate market after the completion of the macroeconomic field.ChapterV?:The impact of interest rate liberalization on economic growth under the new normal economic background.From the beginning of 2012,China's economic development to bid farewell to the past thirty years of sustained high growth process into a one level lower than the high growth process of the new stage of national economic growth,that is the "new normal".This requires the macroeconomic policy,including the interest rate policy adjustment also conform to the new normal.On the basis of empirical analysis in the previous chapters,this chapter further analyzes and compares the effects of the interest rate control and the interest rate liberalization on macroeconomic.Overall,we think that we should firmly promote interest rate reform,allowing interest rates to play a decisive role in the process of the allocation of funds.Above is the framework of this paper.The conclusions of this paper include the following aspects:firstly,China should accelerate the liberalization of interest rate reform.Interest rate liberalization can improve the efficiency of the use of funds.In the current international and domestic economic and financial environment is not optimistic,the interest rate liberalization can promote China's economic structural adjustment and transition;reform of the RMB exchange rate and the internationalization process accelerate also need to establish the fund price mechanism more rapid and accurate response of market supply and demand.Secondly,China should speed up the establishment of market-oriented interest rate conditions.According to international experience,the interest rate liberalization reform success is accompanied by the gradual process of a country's overall economic and financial and so on a series of reforms to jointly promote the.Completely the needs of market interest rates fully competitive banking system and financial market and perfect the money market,a sound system of deposit insurance,bank access and exit mechanism.Thirdly,we should pay close attention to the liberalization of interest rate may bring financial risks.The first aspect is the short term deposit rates will show a rising trend,banks will face the risk of interest rate shrinking;the second aspect is the financial asset price volatility of short-term risk;the third aspect is the risk of bank competition;fourthly,we should strengthen the comprehensive financial institutions risk management trends.Consistent with the above research conclusions,some recommendations would be given in this paper:Firstly,interest rate liberalization should be gradual and progressive advanced;Secondly,interest rate liberalization can promote the optimization of financial structure;Thirdly,we should seize the opportunity to accelerate the liberalization of interest rate,and adjust economic structure;Fourthly,we should speed up the construction of the benchmark interest rate system;Fifthly,monetary policy should maintain steady;Sixthly,risk control should be strengthen;Seventhly,the relation between interest rate liberalization reform and opening the banking access restrictions is important.From the innovation point of this article,the following three aspects:firstly,the introduction of interest rate liberalization dummy variables,using the empirical analysis method to study the impact of interest rate liberalization on commercial bank pricing and risk;secondly,paper study of the impact of interest rate liberalization on non bank finance;thirdly,researching the effect of the interest rate liberalization basing on analysis of panel data model.At the same time,there are two shortages of this paper:firstly,the failure to phased path and risk analysis and suggestions on the steps of the interest rate liberalization in each ofour country.Secondly,because of the data limitations,this paper can not research the influence on the stability of the financial system and macro economy empirical analysis market interest rates in USA and other developed country.