| In recent years, interest rate policy has become quite a favorite tool by People's Bank ofChina (PBOC), and has been used frequently to control macro economy. It worked to certainextend, but due to stalk regional social and economic disparities across the country, this unifiedpolicy shows very different effects in different regions. This paper empirically analyzes theregional differences of interest rate policy efficiency, using data of late 20 years from 1985 to2004, and tries to examine two specific policy effects: triggering effect and allocation effect. Bychecking the relation between interest rate and saving changes, we find that the triggering effectis not statistically significant nationwide, and it diminishes from east to west. By regressinginterest rate to investment, we get a significant allocation effect, which is stronger in east than inwest. The paper then explains from factors like regional income level and structure, financialdevelopment, investment by state-owned & non-state-owned entities. We conclude that one mainreason for the policy efficiency difference is the coexistence of financial deepening in easternregion and financial restrain in middle and western regions. In the end, the paper proposesseveral advices as to improve policy efficiency. |
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