The Empirical Study On The Interest Rate Transmission Channel Of Monetary Policy In China

The monetary policy is an important tool for the macro economic controlling. The government regulates the macro economy by various methods,such as adjusting the interest rates,deposit reserve ratio and rediscount rate.The monetary transmission mechanism is a key content of the monetary policy,and the channel and efficiency of monetary policy transmission mechanism directly influence the efficiency of macroeconomic control.Among all transmission mechanisms,the interest rate mechanism is the most essential one,and is the basis of other mechanisms.Scholars of different schools are paying intension on the role of interest rate in monetary transmission,while central banks of different countries,especially those well-developed ones,use the interest rate as an important policy tool.Since the beginning of 21^st century,great changes have taken place in China's macroeconomic environment;the traditional monetary transmission has been unprecedentedly recognized.Meanwhile,as the financial market is gradually marketablized,securitilized and internationalized,the interest rate plays an even more important role in China.Along with the steadily proceeding of interest rate marketablelized in China,the channel of interest rate transmission will be more and more important.So,studying the interest rate mechanism of monetary policy can help us understand the effectiveness of the monetary policy,the difficult of the financial system reform.There are a lot of literatures on interest rate transmission of monetary policy in China.But in these literatures,the official interest rate and the market interest rate are researched separately.In this paper,the author will compare the response of GDP to the official interest rate with the response of GDP to the market interest rate,and then,will focus on the factors that constraint the effectiveness of the market interest rate transmission. This paper is structured as follows:Section 1 introduces main theories about interest rate transmission mechanism in western countries;Section 2 analyzes the states quo of the interest rate transmission channels in China,and divides it into the official interest rate transmission channel and the market interest rate transmission channel;Section 3 empirically analysis the effectiveness of the official interest rate transmission channel and the effectiveness of the market interest rate transmission channel,by various econometric methods:such as Vector Autoregressive Model, Co-integration Test,Granger causality tests,Impulse Response Function.The main conclusion is that the office interest rate transmission is more effective than the market interest rate transmission;Section 4 compares the effectiveness of these two channels and then analyzes the factors that restrict the effectiveness of the market rate transmission.The factors contain:the regulation on interest rate,the segmentation between monetary market and capital market,and so on;Section 5 provides some advices on how to improve the effectiveness of the market interest rate transmission channel,such as:deregulating the interest rate, reforming the making mechanism of the official interest rate,constructing the interactive mechanism between the monetary market and the capital market, developing the security market,and so on.