The Impact Of Interest Rate Adjustment On Cite And Town Employment

Since1978, China’s interest rate had increased three big times. One was in the late1980s, one was in the mid-1990s, and one was the interest rate adjustment in the2010to2011. The purpose of these three upward adjustments was to control inflation or stabilize prices. Past two years, a series of regulatory policy through the deposit reserve interest rate increases, limiting the number of buyers and improve the proportion of down payment, achieved good results, the house price roused steadily in the2011. Adjustment of interest rates will have a direct impact on investment, especially private SMEs in loans has been in a weak position. If the interest rate is too high, private SMEs had a loan shark to solve financing problems, even if the government will soon take measures to assist small and medium-sized enterprises, but does not resolve the most fundamental issues. Private enterprise to solve more than90percent of China’s employed population, the development of private enterprises is limited; the employment of private SMEs will have a serious negative impact.Although the interest rate increases, resulting in some parts of the unemployed, such as coastal areas, some enterprises are facing serious funding problems which appeared that the boss escaped. But local unemployment cannot demonstrate that the interest rate adjustments affected the whole employment. More difficult to carry out a comprehensive survey of the employment problem in the short period of time, this article focuses on historical data to analyze. Through the Statistical Yearbook on employment data re-estimate the unemployment rate, making the unemployment rate as close as possible to the real unemployment rate, and then obtain the one-year lending rates, these calculate the correlation of two variables, at last establish a error correction model.Traditional economic theory suggests that interest rates impact employment on tow side-income and substitution effects. The income effect means lower interest rates, companies can pay less interest loans, and then the business will increase investment, the aggregate demand of society increases, the demand for labor increases, and thus an increase in employment. Refers to the substitution effect, if the lower interest rates, investment in fixed assets relative reduction in cost, companies will consider increasing the capital to reduce labor, then employment reduced. Research in this area there are three main results. First, there is no effect. Second, the impact of lower interest rates is in favor of employment. Third, lower interest rate is not conducive to the employment. Most of the literature using the registered unemployment rate data, the data selected differently will bring different analyzes results. This article will consider estimating of the true unemployment rate and have a new research of the impact of interest rate on the unemployment rate.China most studies the unemployment rate data for the urban unemployment rate.2000and2010census, the urban and rural unemployment survey data show that the urban unemployment rate is greater than the rural. Other rural unemployment data are scarce, so, this article focuses on the impact of interest rate on the urban employment.All along, the registered urban unemployment rate of reliability is being questioned-the registered unemployment rate cannot guarantee that every town of unemployed workers to register; the registration may have hidden income; unemployment survey found that some of the unemployed do not know to go to register his unemployment. Compared to registered unemployment rate, the survey unemployment data is more reliable. But our survey on unemployment rate began in the early1990s, less data will bring a great limitation when data analysis. the estimated unemployment rates by many studies are Roughly close to the survey unemployment rate after1996, and these data can be found in the public statistics such as the China Statistical Yearbook.The purpose of this paper is not just analyzing if the interest rates have a significant impact on the unemployment rate and employment in each industry. The ultimate purpose is to find the correlation between various economic variables form the results of the data analysis, and also to find which industries are more sensitive to interest rate adjustment, which industries are not sensitive to the changes in interest rates, What is the reason for this phenomenon, and thus present how the policies developed to produce good results on the entire economy and employment, cannot being ignored employment problems resulting in unemployment and then serious social problems rise sharp and more serious economic problem coming when controlling the housing bubble or inflation,The structure of this paper is step by step analysis the impact of interest rates on employment from the whole to the part. Of course, after the correlation analysis, still need to make appropriate recommendations and outlooks. The structure is as follows:Chapter Ⅰ, introduction. Discuss the background and the economic significance of this writing. Analyze the general idea of this writing, and problems may encountered and the solutions.Chapter Ⅱ, is literature summary. Before the analysis on interest rates and employment, we need to find some theoretical support for the employment impact on interest rates, this part of the literature will be placed on the top. In addition, a lot of literature has an analysis on the relationship between interest rates and unemployment, including China’s analysis and other countries’. The article also cited a study done by the China’s unemployment rate estimated. And other factors impact on employment effects, this part of the theory will be reflected in other chapters.Chapter Ⅲ, the unemployment rate is estimated. From some of the literature, this article will select some of the unemployment rate estimation methods to integrate, make a research on the data from China Statistical Yearbook and China Labor Statistical Yearbook, and find a best estimate. Estimated results will be placed in this chapter.Chapter Ⅳ is the relationship between interest rates and unemployment. As time series, there will have a unit root test firstly, then get their smooth nature in order to establish the co integration relationship between the two variables, and finally establish the co integration model. Every step is very important, if one of the step does not hold, where the relationship between the interest rate and the unemployment rate is not established. Finally find the correlation between the two variables and reason to produce such results from the final model. And then analyze how the impact of the interest rate on the employment of the three major industries and some small industries. In particular, the financial and real estate industry mentioned at the beginning, so it should give special attention to the employment of these two industries when interest rates change.Chapter V is the transmission mechanism of interest rates on employment. In theory, the transmission of the interest rates on employment is through by investment-consumption-the total social demand-the demand for jobs, so this article will analyze if the interest rates conduct in this process successfully, may encounter what situation, what are the reasons. After this part of the analysis, the relationship between interest rates and employment analysis is finished.The main features of this paper are the following two aspects. First, from the point of view of the estimated real unemployment rate to analyze the impact of interest rate on the unemployment rate, a lot of research literature on the relationship between interest rates and unemployment is the registered urban unemployment rate, and the required data for estimation can be found in China Yearbook, which can greatly reduce the cost of data analysis, provide a reference for later study. Second, joined various industry to interest rate sensitivity analysis, in order to find what industry more sensitive to changes in interest rates, which the industry is not sensitive to changes in interest rates. This is a more comprehensive article studies on the relationship between interest rates and employment. Finally, the paper also analyzes the transmission mechanism of interest rates, from the interest rates pathway we can understand the rate is affected in which part, resulting in the results of the analysis about interest rates and unemployment in this article.