China's Interest Rates On The International Commodity Price Fluctuations Of Foresight

With the deepening of China’s opening up and growing demand of import for rawmaterials, the impact of international commodity prices volatility on China’smacroeconomy is increasing. The international commodity prices fluctuations’ impacton China’s level of interest rates is channeled through inflation and the nationaloutput.Based on the modified classical Taylor model, this thesis examines theforward-looking response of China’s interest rates to the fluctuations in internationalcommodity prices. The empirical results suggest that in the sample period, theforward-looking response of the interest rates to concerned variables is weak.Specifically, the interest rate volatility responds rapidly but not significantly tofluctuations in international commodity prices. Its response to changes in the domesticoutput gap and changes in the inflation gap is weak and slow.The paralyzed price transfer channel of international commodity price and thenon-marketization of interest rate may lead to the weak forward-looking reaction ofinterest rate.