State Characteristics Of China's Real Interest Rate

As the cost of borrowing, the interest rate is an important variable of capital market and the real economy. The dynamic changes of real interest rate are always the important basis for market participants making decisions,while interest rates regulated by Chinese government.Mean the while, real interest rate affected by exoqenous factors works as the economic leverage in traditional economic theory, and also can truly reflect the basic condition of the economic operation in an all-round way. Real interest rate keeps long-term and stable relationship with price, employment and economic growth. Its stationarity is also the precondition of many core financial theories and monetary policies. Therefore, studing the stationarity and state switching characteristics of China's real interest rate is of great realistic significance for understanding China's financial market environment, macro economic situation, and providing evidence for making monetary policies.Combining the existing research results at home and abroad,we do some theory summary and empirical exploration. We analyze status and rate levels of several important interest rate such as rediscount rate, Treasury rate, china interbank offered rate, deposit and loan ' s rate, expound the structure characteristics and existing problems of interest rate system and review China's interest rate policy and marketization since reforming and opening. We also study the stationary and regime switching characteristics of real interest rate through a regime switching autoregressive model fitted by monthly real interest rate data during the period of 2001 to 2014. A first-order autoregressive state space model with two state Makov switching can fit the sequential characteristic of interest rate reasonably. And the economic development of this period can be divided into three stages. The study found that, in consider of state transformation, the real interest rate generally going stable and there is a trend of mean reversion. The regime of interest rate in different stages can be linked with economic operation condition reasonably.