The Study On The Effect Of Monetary Policy On Interest

After Alan Greenspan was appointed as the U.S. Federal Reserve Chairman, the role of the federal funds rate was fully realized. While the strategy has been questioned by some economists, high economic growth, low inflation and low unemployment were still successfully achieved. In the process of fourteen times adding interest, the 10-year treasury rate, as an important indicator of future economy, was serious invert with the federal fund rates. Media, economists, and the U.S. Federal Reserve official have given the corresponding explanations. Greenspan believes that the market is undergoing some changes, and these changes have not been understood by us. Whether it is true that long-term interest rates inversion will mean that the U.S. economy is on the pessimism? This is the starting point. This article contains the following parts:In the first chapter, we analyses the main tools and the transmission mechanism of monetary policy of the United States. First, we have a detailed description of the three most widely tools that U.S. Federal Reserve dependents on and of how they are used to achieve the U.S. Federal Reserve monetary policy. At the same time, we point out the general transmission paths of the U.S. Federal Reserve monetary policy. Monetary policy affects the operation goals mainly through the three tools, which further affects the intermediate goals, and then achieves the ultimate goals by stable relations between the intermediate goals and the ultimate goals. While the operating procedure is different, the impact of monetary policy is different. And the impact on interest rates is also different.In the second chapter, we highlight the interest rate transmission mechanism of the U.S. Federal Reserve monetary policy. Monetary policy affects short-term interest rates, and then short-term interest rates affect long-term interest rates, long-term interest rates affect the ultimate goal. According to the pure expectation theory, market liquidity preference theory and the market division theory, after the U.S. Federal Reserve raises the federal funds rate through the reserve market, short-term interest rates rise will raise long-term interest rates. It will change the future expectation, which leads long-term interest rates to rise. But the magnitude and direction of change are not very sure. Long-term interest rates affect output through investment effect, wealth effect, consumption effect, etc. Long-term rates also affect price, but consensus does not exist. It is generally believed that the short term interest...