China's Interest Rate Policy Conduction Asymmetric Effect From 1993 To 2003

Part one: the main content and viewpiontsMany economists believe that contractionary monetary policy can slow the economy more than the expansionary monetary policy can stimulate the economy. This is called"asymmetric effect of monetary policy". Recent China's experience suggests that may be the case. When People's Bank of China (PBC) implemented contractionary monetary policy in 1993, the increased interest rate restrained the investment and consumption effectively. Yet when interest rate was reduced in 1998, the economy did not response actively to the interest rate policy. The purpose of this thesis is to test whether the asymmetric effect exists in China.The thesis has four chapters as follows: The summary and reviews of theories and empirical literature on the asymmetric effect of interest rate policy, the empirical analysis on the asymmetric effect of interest rate changes, the deeper analysis for the effect of interest policy during inflation period and recession period, conclusions and suggestions.The first chapter mainly reviews the theories and empirical literature on the asymmetric effect of interest rate policy. In the first part of this chapter, I summarize the overseas research and find that the research on this topic can be traced back to 1993, and most of empirical researches support the viewpoint that the increase in interest rate will impose more impact on economy than decrease in interest rate. In the second part of this chapter, I summarize the domestic research and find only a few articles have studied the asymmetric effect of interest rate policy before.In chapter two, the thesis analyzes the asymmetric effect of interest rate changes by empirical approach. The research purpose is to test whether the asymmetric effect exists in China. The test procedure employed is similar to that of Cover (1992) and Morgan (1993).