Analysis On The Impact Of Interest Rate Changes On The Economy In China Since 2008

From September 2008 to the end of 2015, China’s central bank has adjusted deposit and lending rates for 19 times and adjust the statutory deposit reserve ratio for 25 times. Frequently of using interest rate policy reflects the importance of interest rate policy. Zhou Xiaochuan has said that the central bank cut interest rates for many times, mainly based on changes in China’s overall price, in order to keep real interest rates at a reasonable level, reduce the financing cost of the real economy and strengthen the financial support for the real economy. Economic development, industry oriented. The real economy is the embodiment of the national productivity, the material base of the comprehensive national strength, and the foundation of the survival and development of human society. The real economy plays a decisive role to the development of financial industry, financial industry does not exist independently from the real economy. As China continues to promote the marketization of interest rates, the central bank’s control of commercial bank lending behavior weakened. Whether the adjustment of the benchmark interest rate can effectively guide the changes in bank lending rates, thereby reducing the financing costs of the real economy, it requires in-depth analysis and research. It is the real interest rate which has a real impact on the economy, but scholars have different point of view on which the real interest rate is positive or negative impact on economic growth. The mainstream school represented by John Maynard Keynes has always stressed the reverse change relation between interest rates and economic growth. In order to promote economic growth, the government should take a cut interest rate policy; The "Financial Deepening Theory" proposed by Mckinnon and Shaw (1973) argues that developing countries commonly exists "financial repression" phenomenon, so the government should relax interest rate controls, increasing the efficiency of the financial system. Therefore, this paper will analyze the relationship between real interest rates and the main economic variables.Using the method of comparative analysis, normative analysis and icon analysis, through comparing the central bank’s benchmark interest rate, bank loan interest rate and the real interest rate firstly, This paper analyzes the effect of changes in interest rate policy on the real economy from the perspective of financing costs, and then analyzed the relationship between these three interest rate and consumption growth, the growth rate of savings, investment and growth rate of output growth.In the part of empirical analysis, with the VAR model and impulse response analysis, we find:(1) real interest rates and economic growth are negatively correlated in the short term. Because the level of interest rates will directly affect the level of corporate finance costs, the rise of real interest rate will increase the burden, inhibit investment and curb investment; (2) Real interest rates and economic growth has a significant positive correlation in the long term.But there is no direct causal relationship between them, it does not say that rising real interest rates will lead to increase economic growth. Through the analysis of the pulse effect diagram, we know that when the real interest rate is positively impacted, the investment can be stimulated by increasing the loan conversion rate, thus promoting the economic growth. According Mckinnon and Shaw’s "financial deepening theory", this paper attributes the positive effect of real interest rates on loans conversion to the continuous progress of Interest rate marketization reform and the continuous improvement of the financial system.By analyzing the existing literature, this paper finds that most of the literature uses the central bank’s benchmark interest rate as the nominal interest rate. This paper first uses the bank loan interest rate that has a direct impact on the real economy innovatively. This will ensure that the impact of interest rate policy on the economy more accurate and meaningful.