The Study Of Problem Of RMB Deposit Interest Rate Marketization In Our Country

About one and half decades ago China started to liberalize its RMB deposit interestrates, which was the last and most import step in the reform process of interest rateliberalization. Literature review shows that there has been no consent on the choice ofstage and timing for RMB deposit interest rate liberalization in China. In this thesis theauthor intends to have a thorough analysis of this issue, both theoretically and empirically,and offers viable policy recommendations for RMB deposit interest rate liberalizationreform.Based on a screening and review of a large body of domestic and foreign literature onthe issue, the author finally chooses the financial development theory as the theoreticalbasis for analysis. Historical material and data are used to evaluate the stages of RMBdeposit interest rate liberalization reform. Newly published journal papers and reports onthe internet provide information on the status quo of RMB deposit interest rateliberalization, which lays foundation for the conclusions of the thesis. The authordeliberately chooses the USA, the UK and India as successful cases for deposit interest rateliberalization, and three Latin American countries as failure cases, and for each case theauthor examines its background for deposit interest rate liberalization, the reform processand draws implications for deposit interest rate liberalization in China. Finally VARmodels are used to study the effects of changes in deposit interest rate on GDP, rate ofgrowth of RMB time deposits, rate of growth of final consumption, and rate of growth oftotal capital formation,The empirical analysis proves that liberalization of12-month time deposits as astarting point will not affect the macro-economy negatively, but stimulates consumptioneffectively. The choice of the following step is based on theoretical expectations and theMathieson model, which expands the ceiling rates for pairs of short-term and long-termdeposits gradually. In order to carry out the reform smoothly, the author puts forward thefollowing policy recommendations, namely, improving macro-economic environment, fostering micro-economic players, establishing well-organized financial markets, raisingcompetitiveness of the banking sector, and providing supporting measures.Different from most papers on interest rate liberalization, this paper contributes tothe literature by focusing on studying RMB deposit interest rate liberalization, and for thefirst time, employing the Analytic Hierarchy Process in measuring the extent of thisliberalization, based on which a thorough analysis of the issue is carried out.