The Empirical Study On The Effectiveness Of Interest Rate Transmission Mechanism Of Monetary Policy In China

Currently, macroeconomic situation of our country is good, but our country’s monetary policy toregulate the operation of the economy in promoting economic growth and stable prices is in a dilemma: notonly to stimulate the economy with monetary support, but also to prevent inflation. In monetary policy,interest rates play a decisive role. As China’s market-oriented interest rate process forwards, it’s action willbe more outstanding. The western developed market economy countries have gotten the success ofpracticing the interest rate transmission mechanism of monetary policy and have conducted relativelymature theory research. The present situation of our country is controlled interest rate and market interestrate coexist, which has its particularity. Based on the above background, this article chooses the empiricalstudy on the effectiveness of interest rate transmission mechanism of monetary policy in china as thesubject of dissertationThe research on this subject has important theoretical significance and the practical significance.Theoretical significance of this paper: The research on this subject is very meaningful to the theory ofinterest rate transmission mechanism of monetary policy. The real significance of this paper: we areanalyzing the effectiveness of interest rate transmission mechanism of monetary policy in china from theperspective of empirical analysis, which quantitatively demonstrates the status of the effectiveness ofinterest rate transmission mechanism of monetary policy in china, and the situation of links of interest ratetransmission mechanism of monetary policy in china, analyzes the reason, and puts forward thecountermeasure proposal.This paper consists of five chapters.The first chapter is introduction. In this part, the related literature at home and abroad which is onan empirical analysis of the effectiveness of interest rate transmission mechanism of monetary policy arereviewed.The second chapter expounds the relevant theory of monetary policy. It includes monetary policyoverview, the theory on interest rate as the intermediate target, and the theory of interest rate transmission mechanism of monetary policy. In the part of the theory of Interest rate transmission mechanism ofmonetary policy are expounded the interest rate transmission mechanism theory of the Wick sell, theinterest rate transmission mechanism theory of Keynes, Hicks and Hansen’s theory of the transmissionmechanism of interest rate, the interest rate transmission mechanism theory of Tobin theory, and Taylor’srule and his theory of the interest rate transmission mechanism of monetary policy.The third chapter introduces the status of our country’s interest rate transmission mechanism ofmonetary policy. It includes the introduction of China’s monetary policy transmission mechanism and theconduction path of the controlled interest rate and market interest rate of china. Commenting the monetarypolicy transmission mechanism in China, analyzing the situation of the controlled interest rate and marketinterest rate coexist in china, and the present status of the interest rate transmission mechanism of monetarypolicy.The fourth chapter is about empirically analyzing the effectiveness of interest rate transmissionmechanism of monetary policy in china. First introduces the related econometric theory and econometricmodel. Then states variables selection, illustrates the data and the data processing and stability test. Thispaper selects variable index of money supply, interest rate index, consumption index, investment index,yield index and price index. After that, by using econometric research methods such as VAR, VEC model,and co-integration test, Grainger Granger causality test, impulse response analysis, variance decompositionanalysis and so on, the empirical analysis are carried on from the following five aspects: the empiricalanalysis of market interest rate conduction path of monetary policy, the empirical analysis of the controlledinterest rate conduction path of monetary policy, the comparative study of the conduction effectiveness onmarket interest rate and the controlled interest rate affecting consumption, the comparative study of theconduction effectiveness on market interest rate and the controlled interest rate affecting investment, thecomparative study of the conduction effectiveness on market interest rate and the controlled interest rateaffecting total output and price. This is the innovation in this paper: multiple-perspectively,comprehensively and empirically analyzing the effectiveness of interest rate transmission mechanism ofmonetary policy on the status of coexist of market interest rate and the controlled interest rate in china.Conclusion: the controlled interest rate and market interest rate conduction effectiveness of the interest ratetransmission mechanism of monetary policy in china are not significant; the controlled interest rate and market interest rate conduction effectiveness of the interest rate transmission mechanism of monetarypolicy in china is inconsistent, even contrary to theory in some links; there is lag situation in the controlledinterest rate and market interest rate conduction effectiveness of the interest rate transmission mechanismof monetary policy in china.The fifth chapter analyzes the factors of restricting interest rate transmission mechanism in Chinaand puts forward the corresponding countermeasure proposal. The following are Factors restricting ourcountry interest rate transmission mechanism in china:(1) The situation that interest rates are not fullymarket-oriented in china has restriction on effectiveness of interest rate transmission mechanism ofmonetary policy.(2) The savings and consumption of residents are insensitive to interest rate fluctuations.(3) The corporation’s investment in China is not sensitive to interest rate fluctuations (4) The commercialbank.is lack of sufficient interest rate sensitivity.(5) Financial market remains to be perfected further. Stillneed to improve the efficiency of capital market and money market.(6) The central bank still needs toimprove the independence of monetary policy operation. Countermeasure suggestion are: China shouldfurther promote market-oriented interest rate reform, raise financial organization, enterprise and dweller’sinterest rate sensitivity, further promote the enterprise, banking reform, perfect financial marketconstruction, increase the central bank monetary operational independence, improve the central bankmacroeconomic regulation and control, and strengthen financial supervision. Making china’s interest rateconduction mechanism more unobstructed, to meet monetary policy well promoting the macroeconomic.