Capital Account Opening, Exchange Rate System And Domestic And Foreign Interest Rate Differences

With capital account liberalization and promote market-oriented interest rates, access to international capital freedom continues to increase. A country’s domestic monetary policy interest rate fluctuations and are affected to a certain extent, the main purpose of this paper is to analyze the impact of capital account liberalization on a country’s interest rate direction and depth. Thus make useful suggestions on China’s capital account liberalization and market-oriented interest rate reform.On the basis of capital account openness and measure the difference between the impact of capital account liberalization on domestic and foreign interest rates from the theoretical analysis, in order to more objectively analyze the impact of capital account liberalization on a country’s interest rate volatility, the four countries of this article different exchange rate regimes as research subjects, and the difference between domestic and foreign interest rates as the dependent variable, and the rate of change in the degree of openness of capital account exchange rate as explanatory variables SVAR model to build an empirical analysisThe empirical results show that in addition to China, Hungary, Switzerland and Australia, three countries, the impact of capital account liberalization on domestic and foreign interest rates are negative difference began to affect subsequent positive and negative fluctuations gradually tends to zero. China has a positive effect at the beginning, then gradually back into negative tends to zero. Open capital account of the difference between domestic and foreign interest rates contribution of the lower degree of openness in China and Hungary about 25%, Switzerland, Australia and China is at 40% down. Interest rate differential impact of exchange rate movements on the exchange rate regime is open low countries(in Switzerland) for the negative impact of the higher countries(Hungary, Australia) at the start after a brief positive effect negative effect. The contribution rate of the four countries(China, Switzerland, Hungary, Australia) were 5%, 37%, 57% and 39%.For its part, China-US interest rate differential is the main source of influence comes from the change in the interest rate market reform, but because of capital account openness, Granger causality existed between domestic and foreign interest rates and the rate of change of the exchange rate difference between the three, it coordinated promoting the three reform in order to promote our financing costs continue to decrease, as well as the healthy development of market interest rates.