Study Of The Economic Effect Of Changes In Interest Rates

The study is focused on the economic effects of changes of the interest rate of China from 1980 to 2000. First, we analyze the theory of interest utility and reveal the transmission mechanism of interest rate during the economic transforming period, which is considered as the theoretical basis of studying the interest rate changes of China in this paper. Second, we review the history of interest rate changes since 1980 and reveal the orbit and characteristics of interest rate changes. Then, we positively analyze the effects of interest rate changes on the participants of the goods market, the financial market and the targets of macro-economy respectively and reach the conclusion that the profit of interest rate changes is not good enough. On one side, the market mechanism is not effective. The market does not cause the form of interest rate and the market transmission mechanism is suspended. On the other side, as market participants, enterprises, residents and financial institutions cannot behave independent and cannot reflect the real social demand, so the market transmission mechanism becomes invalid. Meanwhile, the money market and the capital market are inefficient, so the running of interest rate policy lacks of a sound market circumstance. As a result, the utility of interest mechanism is hindered. To make the interest rate mechanism work normally, there are some suggestions given: perfect market mechanism and promote the marketization of interest rate quicken the reform of independence of market participants accelerate the development of the financial market strengthen the supervision and ensure the efficiency of interest rate policy...