Empirical Research On The Impact Of Interest Rate Liberalization Reform On The Technical Efficiency And Productivity Of China's Banking Industry

This paper adopts three-stage DEA and DEA_Malmquist methods to measure the technical efficiency and production efficiency of 91 commercial banks in China from1988 to 2018,and then uses a scientific method to quantify the process of interest rate liberalization named as IRL reform from 1993 to 2018.Finally,the static panel ModeI One and the dynamic panel Model Two are designed to analyse the impact of IRL reform on the statistic efficiency and dynamic total factor productivity of China's banking industry.The static panel estimation results show that the progressive IRL reform adopted by China has a significant influence on the technical efficiency and scale efficiency of China's banking industry and presents an obvious inverted "U" relationship.The inflection point corresponds to the time of the policy that deregulated loan minimum interest rate control,which indicating that the liberalization of loan and deposit interest rate control has a certain negative effect on the technical efficiency of commercial banks in China.The dynamic panel results show that the reform of IRL has a more obvious policy lag effect on the productivity of China's banking industry.Although it has a significant adverse effect on the productivity of the lagging period,when the commercial bank has passed the buffer period,the productivity level of the commercial bank will improve with the deepening of the IRL.The IRL mainly intensifies the diversification of banking operations to increase the proportion of non-interest income,which indirectly has a positive effect on bank productivity.Not only that,the IRL also influencing the market structure of the banking industry,it has an indirect positive impact on the technical efficiency and productivity levels of commercial banks.In addition,interest rate liberalization reforms have different impacts on commercial banks of different asset sizes.No matter from the perspective of technical efficiency or productivity,there is no significant difference in the efficiency level of large Chinese-funded commercial banks,which means that they are less affected,while small-scale Chinese-funded commercial banks have a greater impact,which means they are more affected.