Analysis On Effectiveness Of Monetary Policy Transmission Mechanism Of Interest Rate In China

Interest rates transmission mechanism is a process effecting the whole national economy, which reflects the way that monetary policy regulate interest rate, and how other economic variables, such as consuming and investment, had been caused through it. Since the90s of the20th century, with the world’s financial deregulation relaxed and financial innovation accelerated, it has been more difficult in the money supply indicators’definition, statistics and monitoring, and it has been weakened continuously in the relationship of macroeconomic variables between money supply, national income and prices. Therefore, many western countries turned their monetary policy framework into interest rate-driven, which means that interest rate becomes the main channel of monetary policy transmission in these countries.As far as Chinese conditions, it has great theoretical and practical significance to carry out research of interest rate transmission mechanism in China in such a domestic and international environment of the interest rate market reforming deepened and the status of the interest rate transmission mechanism gradually improved. Formal operation in January2007, the Shanghai Interbank Offered Rate (referred to as SHIBOR).Our country is committed to learning from international experience, and strive to the SHIBOR build into our emperor "benchmark interest rate", in order to achieve the interest rate transmission of monetary policy. It is foreseeable that the background of global trends in interest rate-oriented monetary policy framework, with the constant improvement of our financial system, the continuous development of financial markets, the interest rate transmission channel will play in China’s monetary policy transmission is increasingly important role. The status of the interest rate transmission mechanism in continuous improvement, but due to our interest rates have not yet fully market-oriented, there is a market interest rates and control of interest rates for both, and the development of China’s bond market is not perfect, there is less variety of transactions for a period less trading volume characteristics, which are seriously affected the interest rate transmission of monetary policy in China. According to the above reasons, this paper aims to research the current interest rate transmission mechanism in China is smooth and effective, and provide some useful thinking in order to further enhance China’s interest rate transmission mechanism effect. In this context, the theory and the effect of interest rate transmission mechanism in China to carry out empirical research has very important theoretical and practical significance.This paper first introduces the use of interest rate transmission mechanism of monetary policy theory and the major Western economically developed countries, the interest rate transmission mechanism, and since the founding of our country’s interest rate policy control course review. Look at the interest rate transmission mechanism of combing the major developed countries in Europe and America, it has one thing in common, through the operation of monetary policy by the central bank to guide the benchmark interest rate changes, by the benchmark interest rate to guide the change of the entire interest rate system, and thus investment consumption and other behavior having an impact, and ultimately affect the price level, foreign exchange reserves, the gross national product, thus the effective conduction of monetary policy intentions. From China’s interest rate regulation by both the Central Bank of adjustments financial institutions deposit, lending rates directly regulated, there are also indirect control of the central bank monetary policy operations of the market benchmark rate, the interest rate transmission mechanism showed the "dual track" feature.Secondly, since the interest rate transmission mechanism of the role play to the extent depends on the interest rate market, the main theory of the interest rate market were reviewed, has combed the interest rate market in China, and China’s current interest rate system and its characteristics are summarized and analyzed. China’s interbank borrowing market, inter-bank bond market, bills market interest rates have been basically market-oriented. Deposit and lending rates of financial institutions at the central bank under the control of the market process is step by step, so China’s current interest rate system shows the coexistence of control interest rates and market interest rates, which increases the complexity of China’s interest rate transmission mechanismsex. Overall, China’s current interest rate system the following three features:First, the control of interest rates and market interest rates "dual track" parallel interest rate adjustment of both direct adjustment of the central bank benchmark deposit and lending interest rates, there are also indirect adjustment of market interest rates through open market operations, interest rate-setting the final decision remains at the State Department, largely reflects the Government’s intention, Given the characteristics of this "dual track", the interest rate system in China compared with developed countries, the full market interest rate transmission mechanism to a certain degree of particularity; Second, the interest rate system is more complex, and various financial institutions in China by the central bank to develop a unified lending rates up to100species, called the world’s most complex system of lending rates. China financing channels is still based on indirect financing of financial institutions as an intermediary-based, such a large and complex financial institutions to deposit and lending rates system not only makes the central bank too many factors to be considered in the formulation of the benchmark interest rate at the same time, such a complex The interest rate also makes the interest rate transmission process is more complex; Third, the interest rate structure is irrational, there is excess deposit reserve rate than demand deposits, interest rates, bank deposit and loan spreads and other characteristics.The Third, because the practice of interest rate transmission mechanism from the major developed countries, the benchmark interest rate has prominent role in the interest rate transmission mechanism in China’s benchmark interest rate conduction effect, conducted a thorough and systematic study.Studies have shown that in the case of interest rates a full market, the benchmark interest rate changes can affect the credit market interest rates, thus achieving effective conduction of monetary policy, but in the case of control of interest rates and market interest rates track parallel, due to the operation of monetary policy can only be limited areas in the money demand curve to have an impact, so the interest rate transmission mechanism is not valid in most cases. Through this a few years the collection of economic data in order to demonstrate the results of theoretical research, using EVIEWS statistical software on the effectiveness of China’s interest rate transmission mechanism of the regression analysis, correlation analysis, Granger causality test, further conduction effect of the benchmark interest rate, an empirical study. Open market operations as the main representative of the means of the central bank’s monetary policy, central bank bills, interest rates and the repo rate as the main tool of open market operations, at the same time, select the inter-bank bond market repo rate (P007) and of SHIBOR (1W)on behalf of the benchmark interest rate, Market interest rate is divided into three, respectively, based on inter-bank bond market and long-term repo rate and SHIBOR long-term repo rate as the representative of the money market interest rates to bank deposit and lending rates as a representative of the credit markets, interest rates, stock market rate of return as a representative of the capital market interest rates, empirical research on this part of the monetary policy reference interest rate market interest rates. From the empirical results, we can draw the following several conclusions:â‘ Open market operations on the money market interest rates has a more significant role in guiding. Empirical evidence shows that China’s central bank through the issuance of central bank bills, and take of repurchases, open market operations can produce a more significant role in guiding the main money market rates, the interest rate transmission mechanism of monetary policy in China in the operation from the monetary policy toolsâ†'market benchmarks changes in interest rates this link is more smooth, Their specific pathways, including:central bank bills issued interest rateâ†'bond repurchase rate, central bank bills issued interest rateâ†'SHIBOR central bank is repurchase interest rateâ†'bond repurchase rate, the central bank is repurchase rateâ†'SHIBOR.â‘¡The inter-bank market bond repurchase rate in our country to play the part of the benchmark rate function. Empirical evidence shows that have a more significant role in guiding the central bank bills issued interest rates and central bank repo rate on the bond repurchase rate, bond repurchase rate with good controllability and guide, While the repurchase rate of the bond market because of its largest trading volume, the participants up to the central bank is repurchase rate also has a more significant impact, which means that the central bank to some extent, according to the bond market repurchase rate to determine the positive repurchase rate. Visible bond repurchase rate in our country bear part of the benchmark interest rate function, and even bears a certain extent, the intermediate target of the functions of the central bank open market operations. â‘¢SHIBOR benchmark interest rate feature is not yet fully realized. Since2006, the People’s Bank of China to actively foster SHIBOR as the benchmark interest rate, the results from the empirical point of view, but SHIBOR interest rates and central bank for central bank bills issued repurchase interest rates did not significantly affect. The empirical results reflect the central bank open market operations, the lower the SHIBOR the reference degree, the overall point of view SHIBOR benchmark interest rate function yet to be fully play, the SHIBOR playing cause only the Son of Heaven "benchmark rate" is also a long way to go. Changes in short-term benchmark interest rates can not be a significant cause of long-term benchmark interest rate changes, interest rate transmission mechanism of China’s open market operations on this part of the medium-and long-term benchmark interest rates from short-term benchmark interest rate on the block. Therefore, the central bank wants to guide short-term benchmark interest rates through open market operations to influence the regulation and control of the medium-and long-term interest rates in the present certain difficulties.â‘£Changes in benchmark interest rates can not be caused by changes infinancial institutions, deposit and lending rates, financial institutions, changes in deposit and lending rates can not lead to changes in benchmark interest rates. This is China still deposit and lending rates of financial institutions to implement more stringent controls, the degree of market is not enough, the market benchmark rate change is difficult to cause financial institutions to changes in deposit and lending rates, thus the interest rate of China’s open market operations conduction mechanism in this part of the deposit and lending rates from the benchmark interest rate to financial institutions on the block.⑤The benchmark interest rate changes can not cause changes in the stock market rate of return, the change of the stock market rate of return can not lead to changes in benchmark interest rates. Therefore, the central bank to influence short-term benchmark interest rate by regulating the capital market rate of return regulation is difficult to achieve.Finally, based on the foregoing findings, it puts forward the policy recommendations:First, accelerating the market-oriented reform of interest rates; the second is to continuously improve the interest rate sensitivity of the real economy; the third is to accelerate the development of financial markets; the fourth is to improve the independence of the central bank’s monetary policy operations.