Research On The Investment Effect Of Interest Rate Liberalization In Inner Mongolia

Interest rate is the signal to guide capital allocation, investment scale and investment efficiency,to a certain extent, reflecting the adequacy and efficiency of the capital. With the development of Interest Rate Liberalization reform, the investment situation of Inner Mongolia is changing, too. This paper firstly set an index to measure the interest rate liberalization,used Inner Mongolia’1991-2014 annual business data to built the vector autoregressive model, did the co-integration test and impulse response research, at last test the investment effect of Interest Rate Liberalization reform in Inner Mongolia, which including investment scale and efficiency effect.To study the relationship among them, we firstly review the classical interest rate theory, Keynes’s interest theory and the theory of financial freedom economic ideas, concluded the hypothesis that the Interest Rate Liberalization can expand the scale of investment, improve investment efficiency. Secondly based on our Interest Rate Liberalization reform process, we use analytic hierarchy process method, to built the interest rate liberalization index. Finally, using the vector autoregression model empirically test the Interest Rate Liberalization investment effect, using Inner Mongolia’1991-2014 annual data, built the VAR Model. Variables including investment scale, investment efficiency, the region’output and Interest Rate Liberalization index. After the ADF test and the Johansen co-intergration relationship test for these variables, we did the Granger causality test, impulse response figure, finally it is concluded that the Interest Rate Liberalization reform has positive influence on the scale of investment in Inner Mongolia, however the effect on investment efficiency is not significant.According to the Inner Mongolia’economics perform, we give the reasonable answers to why interest rate liberalization has that empirical result, this paper suggest, the industry structure of Mongolia、financial markets function and the financial institution’s running ability is not good, so the interest rate liberalization has no effect to investment efficiency. Based on that, this paper give the relative suggestions to change that situation.