A Study Of The Interest Rate Transmission Mechanism Of China's Monetary Policy

Since the 1980s, the advancements of interest rate and exchange rate's marketizations inmany countries have sped up. The financial innovations have emerged constantly. And thetendency of financial globalization and integration has intensified. In order to adapt to thissituation, many countries have improved their monetary policies one after another andchanged the intermediate goal from the money supply to the interest rate since the 1990s.Because the applicability of money supply as intermediate goal reduced, and the interest ratehas the characters of the controllability, measurability and relevance. Correspondingly, in thefour main types of transmission mechanisms of monetary policy, i.e. the interest ratetransmission mechanism, the exchange rate transmission mechanism, the financial propertyprice transmission mechanism and the bank credit transmission mechanism, the role of theinterest rate transmission mechanism is more and more prominent, and becomes the mostimportant transmission mechanism of monetary policy.After more than 20 years' economic system reform, our country's economy has a veryfast development. Our country's monetary policy and its transmission mechanism alsochanged greatly. At present the role of the interest rate is emphasized in monetary policy'sinstruments and operating goals. The transmission mechanism of monetary policy becamediversified, changing from the sole bank credit transmission mechanism to the coexistence ofthe bank credit, the interest rate, the exchange rate and the property price transmissionmechanisms, in which the bank credit transmission mechanism is still main transmissionmechanism at present. But with the marketization of interest rates, the role of the interest ratetransmission mechanism will be more important. It will be advantageous to enhance thetransmission efficiency of our country's monetary policy and realize the anticipated effects tomake best use of the function of this mechanism.This paper is divided into four chapters: In the first chapter, it briefly explains themeaning of transmission mechanism of monetary policy, the theories of interest ratetransmission mechanism, including the theories of the Sweden school and the Keynes school.And it summarizes the enlightenment of these theories to our country. In the second chapter, itcarries on the empirical analysis of interest rate transmission mechanism in our country. Themain content of the empirical analysis is to find out the effects of the changes of deposit andloan interest rates on residents' deposits and expenses, the fixed asset investments and theeconomic growth. In the third chapter, it analyzes the existing questions of interest ratetransmission mechanism in our country, including the incomplete marketization of interestrates, the lag development of financial markets, the insensitivities of financial institutions, theenterprises and the residents to the changes of interest rates. In the forth chapter, it proposesthe corresponding countermeasures and suggestions to improve the interest rate transmissionmechanism in our country, which mainly includes advancing the interest rate marketization,speeding up the development of financial markets and enhancing the sensitivities of financialinstitutions, the enterprises and residents to the changes of interest rates.