The Impact Of Economic Growth And Monetary Policy On Bank Interest Spreads:an Empirical Evaluation

Taking the theory as the basis, with Chinese data as samples, the paper is focused on macroeconomic determinants of bank interest spreads and the relationship between bank interest spreads、economic growth and monetary policies, seeking particularly to the equilibrium of monetary policy in the coordination of bank profitability and economic growth.The bank interest spread decision theory model is proposed based on the early bank interest spread theory, combined with the modern interest spread theory. Using a partial equilibrium model (deposit and loan market) and a general equilibrium model (money market and product market), the paper analyses the determinants of bank interest spread. It uses a static model and dynamic PVAR model by16China’s listed commercial bank over the period2000-2010to identify the macroeconomic variables that may have been influencing spreads. It presents evidence that there is two-way, complex interaction between economic growth and spreads. Overall, moderate level of bank interest spreads is conducive to promoting macroeconomic stability and growth, however, bank can not enjoy the benefits of economic growth.The fundamental trend and practical operation of monetary policy is important to promote economic growth and maintain banks modest profit. At present, China is undergoing a complicated process of institutional transformation, financial deepening and economic growth. Therefore, the trend of monetary policy during this course can not and should not remain unchanged. With the reforms of interest rate, it is obvious that the three tools of monetary policy need to play a larger role.