The Study Of The Transmission Mechanism Of Interest Rates Of Monetary Policy In China

The transmission mechanism of monetary policy is the theory to analyze how the fluctuation of monetary supply affects the microeconomic entities' action of consumption and investment, and to give rise to a series of change of macroeconomic variables. Simply, it is a channel of affecting economy by the method of adjusting monetary policy. So the transmission mechanism of monetary policy is the base of monetary policy. There are several channels to transmit for monetary policy. Among of them, the transmission of interest rates have the most comprehensive and infiltrative characters, which almost include all the aspects of the transmission of monetary policy. Therefore I think that the theory of the transmission of interest rates will have the guiding meanings to be the ideal theory of the transmission of monetary policy in the future. This paper study the problem about the transmission mechanism of China' s monetary policy in the closed economy from the point of the transmission mechanism of interest rates, and analyze every segment of the transmission of interest rates by using the theory of the transmissionof interest rates .This paper get the conclusion that interest rates can not transmit in these three segments smoothly, for some factors affect and obstruct interest rates to work. Within these three segments, the decisive factors are the elasticity of monetary supply to interest rates, the elasticity of investment to interest rates and the investment multiplier. That these parameters are small relatively cause the obstruction of the transmission of monetary policy theoretically. In practice , some profound reasons give rise to the obstruction of the transmission of interest rates , such as the flaw of financial system and investment system ,the system restrain during the period of economic reform and the degradation of the consuming level of the public. At last, this paper' s viewpoint think that only these problem can be solved radically and a health macro- and micro- atmosphere can be provided, the transmission of monetary policy can become smooth, and interest rates can become an effective measure in controlling China' s economy.