Research On The Mechanism Of Interest Rate Liberalization Influencing The Market Power Of Banks

At present,China's interest rate liberalization reform measures continue,and the overall reform has entered a new stage.These reform measures have always had an important impact on the economy and finance.At the same time,the market power of China's commercial Banks is also in constant change.Some Banks' operation has been improved,while others have continued to deteriorate.This paper focuses on the relationship between the two.Firstly,the mechanism of the influence of interest rate liberalization on the market power of Chinese Banks is discussed theoretically.Secondly,the influence is analyzed empirically.The two aspects of the study for China's bank reform and interest rate liberalization policy implementation of decision-making reference.In the theoretical part,this paper is mainly carried out from the literature review and theoretical analysis.On the one hand,through literature review,this paper examines the impact of interest rate liberalization on commercial Banks in previous studies,and focuses on the analysis of the literature on the impact of interest rate liberalization on the market power of Banks.On the other hand,based on the theoretical analysis of interest rate liberalization and bank market power,this paper proposes the mechanism of interest rate liberalization based on external macro factors and internal micro factors on the change of bank market power.In the empirical aspect,this paper proceeds through three steps and draws important conclusions respectively.First step,the interest rate marketization process of quantitative indicators can be analyzed,first of all,respectively the reform process involved in the money market,deposit and loan market and bond market according to the time line is reviewed,and the main interest rate in the three major market reform and the weighting of quantitative analysis,finally comprehensiveinterest rate marketization index,and to depict the deep process of interest rate marketization in our country.The second step is to calculate the number of commercial Banks' lerner index,and to show the market power of China's commercial Banks.In this process,this paper calculates the deposit market power and loan market power of Chinese Banks based on the SFA method,and makes a comparative analysis of the trend of the two market forces.The results show that the market power of bank loans fluctuated and declined from 2005 to 2015,while the market power of deposit first fluctuated around zero and then declined from 2011.In terms of volatility,the market power of deposit is larger than that of loan.The third step is to study the mechanism of interest rate liberalization affecting the market power of Chinese Banks through empirical analysis.First,an empirical model is established based on theoretical analysis,and an empirical test is conducted on the interest rate liberalization of the deposit market and the loan market respectively through the fixed-effect model method.The results show that the reform of interest rate liberalization in the loan market has a negative impact,and the interest rate liberalization in the deposit market will also reduce the market power of Banks.However,the difference is that interest rate liberalization has a relatively large impact on the deposit market.