Interest Rate Liberalization And Liquidity Creation

China's market-oriented interest rate reform since 1986,has not yet completed.Interest rate liberalization,the impact of China's banking industry by the " spread between deposit and loan " stable profit business model,so that the bank's profit growth has declined significantly.This paper discusses the impact of the reform on the liquidity creation of one of the important functions of the bank in this special historical background.This paper constructs the unbalanced panel data of China's banking industry based on the 1997-2014 data of 185 banks,the comprehensive existing on the marketization of interest rate and liquidity created by the Chinese and foreign research results,using feasible generalized least squares(FGLS)method comprehensive focuses on the interest rate market impact on the overall banking sector liquidity creation,and to further explore the bank heterogeneity and the effect of contact.The study found: The interest rate market liquidity on the overall banking industry to create an inverted U type,which is first increased and then decreased;the interest rate market liquidity for banks to create different types of effects are different;the marketization of interest rate in the bank balance sheet business liquidity creation also has the difference.Based on the above findings,this paper suggests that we should continue to deepen the reform of interest rate liberalization,and make some suggestions on how to carry out the differential regulation of the banking sector and how to control the scale of the off balance sheet business within a reasonable range.