Empirical Study On The Effect Of China's Interest Rate Policy

The purpose of this paper is to measure the effect of China's interest rate policy. Based on the related theories of finance and interest rate, it qualitatively analyzes the applications and reforms of interest rate in China since 1978. And by calculating related indexes and applying some models, the paper quantitatively analyzes the relationship between interest rate and economic growth, savings rate, consumption growth and investment growth. We draw a conclusion that although interest rate policy has some effect on China's macro economy, its eifect is not remarkable. Because of the low-yield investment, the malfunction of the transform mechanism between savings and investment, and some other reasons, the interest rate elasticity oi economic growth, savings rate, consumption growth and investment growth in China are not remarkable. After deeply analyzing and explaining the reasons of the ineflicacy of China's interest rate policy, the paper bring forward some valuable suggestions such as setting up the system of modern corporation and financial market, market-oriented interest rate reform to enhance the effect of China's interest rate policy.This paper contains five sections: preface, the theories of finance and interest rate, qualitative analysis of China's interest rate policy, quantitative analysis of China's interest rate policy, explanations of the results of the quantitative analysis, policies and suggestions.