Research On The Interest Elasticity Of Investment In Our Country And Ways To Improve It

Since the1990s, with the rapid development of economy, finance has got rapid development, has become the pillar industry of the national economy,and the role of financial industry in the national economy is being more and more important. With the improvement of importance of the financial industry in the national economy, the interest rate leverage also gradually appeared in the economic operation, some developed countries uses interest rates as a monetary policy tool to regulate the macro economy.As an important financial variable in modern economics, interest rate also is one of the basic factors of the economic operation, it not only is the important bridge connecting the microeconomic and macroeconomic, but also plays a lever role in economic operation, and it also has intimate contact with almost all financial phenomenon.In recent years, countries all around the world pay attention to the leverage of interest rate,and frequently use it to regulate and control macroeconomic. Nowadays interest rate has become one of the most important monetary policy tools of the central bank to regulate and control macroeconomic macroeconomic,and plays more and more important role in macroeconomic regulation and control.In the modern national economy operation, interest rate is the intermediate target of monetary policy, it is one of the main tools of monetary policy in macroeconomic regulation and control, and it also plays a leverage role in the national economy. The main way of the central bank implements monetary policy is to directly influence the cost of financing by adjusting interest rates, so that it can indirectly influence the quantity of the investors’profit. According to the monetary policy of the central bank, investors determine whether to invest and the size of the investment, then the decision of investors infect the national income and a series of relevant influence factors of the national economy. Therefore, a country’s investment sensitivity to interest rate plays a decisive role to the effectiveness of monetary policy. According to traditional economics theory, the sensitive degree of investment to interest rate changes can be measured by investment interest rate elasticity. Therefore, study on a country’s investment interest rate elasticity can provide a strong theoretical basis and guidance to monetary policy formulation and implementation.The main purpose of this study is as follows:first of all,I study on and sort out the achievements of predecessors, then draw lessons from the research method.Secondly,on this basis, combining with China’s specific national conditions,I do empirical analysis to study our country present situation of the interest rate elasticity of investment and investment correlation between interest rate by using the relevant data of China statistical yearbook and China Economic Net. Finally, combining with the empirical analysis results to the analysis of current interest rate elasticity of investment in our country, I find out the causes of exchange rate elasticity of investment in China is low from the theoretical perspective, explore ways to improve the exchange rate elasticity of investment in China, and put forward relevant policy suggestions, to provide the theory basis of guidance and direction for the formulating and implementing monetary policy of our country.From the point of research methods, this article based on previous research, and the combination of the theoretical research and empirical analysis method. Data in this article comes from the China statistical yearbook and China Economic Net from the period of2002to2012. Regarding the one-year lending rate as independent variables, the whole society fixed assets investment as dependent variable, this paper deals with dependent and independent variables use the consumer price index and index of investment in fixed assets to eliminate inflation. In this paper, I calculate the actual investment interest rate elasticity through statistical methods with the formula of E,=-(ΔI/I)/(Δr/r), use OLS to analyze the relevance of the investment and the interest rate in our country with the formula of lnO=β0-β1r+μby using the Eviews software. According to the research, it is concluded that China’s investment interest rate elasticity is low, the correlation of investment and the interest rate is not big. Finally, on the basis of the above theoretical analysis and empirical analysis, this article thoroughly discusses the cause of the exchange rate elasticity of investment in China is low, find out the ways to improve the exchange rate elasticity of investment in China, and put forward to solve the problems that exists in the relevant policy recommendations. From the perspective of the structure arrangement of this article, this paper includes six chapters. The first chapter is about introduction, mainly introduces the paper’s research background, research significance, research ideas and methods and research framework. The second chapter is literature review part, focuses on the rough introduction of domestic and foreign related research about interest rate elasticity of investment, and a brief review follows. The third chapter is introduction of related theory, elaborates the investment interest rate elasticity of related theory in detail, including the concept of the interest rate elasticity of investment and interest rate transmission mechanism. After that, this chapter analyze the influence of interest rate adjustment to changes in investment from lower interest rates for private investment, government investment and capital market and so on. The fourth chapter is the analysis of the current situation. Firstly, according to the relevant data of China statistical yearbook and China Economic Net, this chapter uses empirical research to analyze the correlation between investment and interest rate with statistical methods and econometric method of our country in the period of2002to2012. Secondly, on the basis of the theoretical analysis and empirical research above, combined with China’s specific national conditions, this chapter made a simple introduction of our country interest rate elasticity of investment current situation. The fifth chapter is the analysis part of reason, analyses the cause of the exchange rate elasticity of investment in China is not sensitive from the market main body, the financial system and the marketization of interest rate and the investment channels and so on. The sixth chapter is the policy approach, this paper expounds the necessity of improving investment interest rate elasticity, and points out the relevant way to improve the exchange rate elasticity of investment in China, put forward the corresponding policy recommendations.The possible innovation points of this article lie in the follows:First, it is pointed out that our predecessors’mistake in the study of exchange rate elasticity of investment in China is that they confuse concept of flexibility and interest rates and be corrected. Second, I use the method of statistical calculation of exchange rate elasticity of investment in China, so that we can see very visually that the exchange rate elasticity of investment in China is low. Finally, according to the combination of theoretical research and empirical research, this paper expounds the present situation of the investment interest rate elasticity is low and its reasons in detail, find ways to improve the exchange rate elasticity of investment in China in many ways, put forward the concrete policy suggestions.