Demonstration Analysis Of Necessity Of Market-oriented Interest Rate

Interest rate is the core of the financial market. To realize market-oriented interest rate is the premise of the exertion of its mechanism. Only after guaranteeing the flexibility and reasonability of interest rate, could we exert the function of interest rate and configure the financial sources reasonable. Market-oriented interest rate is the first step of financial liberalization. It is the objective of interest rate reform. To realize the objective, we should make clear what influence the interest rate most. When such factors change, did the interest rate exert its function if it maintain unchanged. Therefore, it has practical importance to carry out quantitative research. This article uses the method of cointegration model to analyze the relation between fixed assets investment, savings, money supply and interest rate in the long run and short run. The result proves that there are relations between fixed assets investment, savings, money supply and interest rate in the long run and in the short run. So the interest rate should change following the change of such variables. Through demonstration analysis, I could emphasize the importance of market-oriented interest rate and make some policy suggestions.