The Study On The Interest Rate Transmission Mechanism And Transmission Effect

Interest policy is the important part of monetary policy. With the development of financial innovation, interest rate policy is attached more importance in the operation of monetary policy. In our country, interest policy is not only the important part of monetary policy, but also one of the important means by which monetary policy affect the economy. With interest rate tools, the people's bank of China adjust the level and structure of interest rate, affect the demand and supply of money to achieve the monetary aim. Since 1996, interest rate marketization has made stage progress. The people's bank of China increasingly enlarge the pricing right of interest, consummate interest rate management,induct interest rate further functioning of deployment financial resources and control of macro-economy running. Interest rate transmission channel will play a more and more role in monetary policy in our country. Interest rate transmission mechanism is the core part of monetary transmission ones, on which monetary policy depend mostly.Study on interest rate transmission mechanism has not only certain theoretical meanings, but also has such practice ones as ongoing interest rate marketization, financial system reform and financial control system consummate.This paper, referring some scholar's literatures of China and other countries on interest rate transmission mechanism, is based on western country's interest rate transmission theories and China's interest implement practice, study on interest rate transmission mechanism and effect using empirical test, which consist of interest transmission mechanism theories, history of interest rate policy's applying in China, empirical analyses and theoretical analyses. Then, give some advises.Five chapters are divided in this paper. Chapter one briefly introduces monetary policy, interest rate policy and some of western interest rate transmission theories such as Keynesian one, Real interest rate one and financial freedom one, which have closer relationships with this paper. Chapter two reviews the history of interest rate policy's implement in China.Chapter three, using empirical test method, systematically analyses interest rate transmission mechanism and effect, which is main part of this paper. Such econometric tests are used during analysis as Unit Root Test (Augmented Dickey-Fuller Test), Co-integration Test and Granger Causality Test.Since China implemented central bank system in 1984, most data collect from 1984 to 2006. Data resources are China Statistical yearbook, China Financial Yearbook, websites of People's bank of china and National Bureau of Statistics of China.When analyze interest rate transmission mechanism, referring western related theories, the paper analyze each chain of transmission: monetary supply↑â†'interest rate↓â†'investment↑â†'total output↑. When analyze interest rate transmission effect, referring the aim of monetary policy in China, the paper analyze from two ways: oneis the relationship between interest rate and economy output (GDP), the other is the relationship between interest rate and price of goods and service.The conclusions are drawn from this chapter. With the implement of central bank system, inter-bank offered rate and treasury rate have achieved marketization. Interest rate transmission mechanism is increasingly consummated, and the effect of the transmission is increasingly enhanced. The main problems are: control of interest; the change of interest rate could not correspondingly induct the change of savings, consumes, non-government investment. Or may say the cause-effect relationships between them are not significance.Chapter four gives further analysis on the chapter three's empirical test, which consists mainly of the cause of interest control and the causes of obstruct between interest rate and savings, consume, non-government investment.Chapter five On the basis of the above research, the last part of the paper put forward relevant policy countermeasure: deepening reform of interest rate marketization and the related reform. The latter are involved with such reforms: 1. the reforms of state-owned banks and state-owned enterprises; 2. settle of the financing problem of non-state owned enterprises; 3.consummate of social security system; 4.further development and consummate of financial market.