Research On The Dynamic Correlation Of China's Interbank Market Interest Rate And Macroeconomy

Economic growth rate, acceleration of industrial added value, and interbank offered rate, are three important macroeconomic index that are used to reflect the macroeconomic operation status in China. Since reform and opening-up, the development speed of macro economy in China has been always keeping a high level, furthermore, the economic growth rate of our country which is a key economic indicator that reflects the economic strength of a country is consistently ranking in the front ranks of countries. Financial crisis affected on the economy of our country in a way, but the economy hold continued strong economic growth situation relatively. With the development of China's market economy, monetary policy become the most effective and important method gradually which the government use to regulate operation of the macro economy. In recent years, although interbank lending market in China formed late fall behind that in developed countries and exist many problems, by adjusting and reforming the market several times, the market has becoming more and more regular and completed. With the liberalization of our interest rate going on, interbank offered rate gradually become the focus of the research of economy to the scholar. Many scholars prove that interbank offered rate has exactly effect on macro economy of the country, and the effect is still keeping increase. Especially, the scholar's research on macro economy of China penetrates on and on, and has never stopped. In such literatrues, we can find that many scholars has done the research of the correlativity between interbank offered rate and macro economy of our country from many points of view, but, using various econometric model and method, time series model and method at the same time is rarely seen. This paper tries to study the relationship between interbank offered rate and macro economy variables by using several kinds of econometric model and method and time series model and method, and analyze the relationship between interbank offered rate and economic growth rate, and the relationship between interbank offered rate and acceleration of industrial added value quantitatively.This paper is divided by 4 chapters, because economic growth rate and acceleration of industrial added value are familiar variable, we don't have to introduce them in detail in the paper. While introducing interbank offered rate in detail is necessary. In this paper, we introduce the history of interbank lending market and development course, then, we explain the development course of our country, and importance of liberalization of our interest rate. After that, we illustrate the index and relative theory, method, and model that we will use in the paper, which is the theoretical foundation of the positive analysis of the relationship between interbank offered rate and macroeconomic variables. And we will also give some policy suggestion based on the result of the positive analysis. The structure of the paper is as follows:In the first part of this paper, we introduce meaning and the aim of the paper, and the structure and the main conclusion of this paper. And in the second chapter, we will also introduce the models and approaches which we can use to measure and test the correlativity of interbank offered rate and macroeconomic variables. In the first section of the second chapter, we introduced the testing methods by which to differentiate stationary series and unit root test, i.e., ADF testing method and PP testing method. This is the first problem to solve in the analysis of time series. Then, we introduced the co-integration theory that is used to judge the co-integration relationship between two time series by using Johansen eigen value test. And we would get the relational expression of co-integration, furthermore, we could get co-integration portfolio. The co-integration portfolio of the economic time series denote a kind of relationship of common tendency between the economic variables, and it always has explicit economic meaning. Then, we take Granger causality testing method to test the relationship between the level of each tow variables which can test the explanation level between economic variables. We also use VAR model to research the relationship between variables. It is used to forecast the relationship of time series system and analyze the effect that the random disturbance gives the system. The key strengths of VAR model is that it avoids the demand of structural model, and it takes each endogenous variable as the lagged value of all the endogenous variable to construct the model.At last, we introduced the impulse response function and the variance decomposition which are also used to analyze the relationship between variables. Impulse response function is mainly used to analyze the dynamic correlation effect on the system when the system is impulsed or error term has changed. While, variance decomposition will evaluate the importance of every different structural impulse according to the contribution degree which every structural impulse give to each endogenous variable.Chapter 3 and chapter 4 are positive analysis of this paper. It is the most important part of the paper. In the two chapter, In the chapter 4,we test the correlativity of interbank offered rate and macro economy variables by using the models and methods introduced in the chapter 2. Then we will give some policy advice according to the result of positive analysis.First, we use co-integration test to prove that there is a negative correlation between variables, and that is a relationship of long-run equilibrium. Before the co-integration test, we do the ADF test and PP test. The result suggests that the two time series are single integration process.And then, we use Granger causality testing method to test the relationship between the interbank offered rate and macroeconomic variables. The result is that, there is a negative correlation between interbank offered rate and macroeconomic variables. Interbank offered rate has more effect on economic growth rate than economic growth rate effects on interbank offered rate. While, there is also a negative correlation between interbank offered rate and acceleration of industrial added value. But, acceleration of industrial added value has more effect on interbank offered rate. Then, we use VAR model to test the relationship between these variables. The fitting between variables is perfect. It also proved that there is a serious relationship between interbank offered rate and macroeconomic variables in our country.After that, we use the impulse response function and the variance decomposition to prove there is also a negative relationship between interbank offered rate and macroeconomic variables. But because of the low level of interest rates liberalization and incomplete policy, the relationship is not extremely notable. That is the purpose that we do the research in this paper. The result that there is a negative correlation between interbank offered rate and macroeconomic variables has realistically directive significance to formulate monetary policy in our country. At last, we give some economic suggestion according to our result of the empirical analyze in this paper.