Research On China's Monetary Policy Interest Rates Effect

Interest rate marketization is gradually promoted and the economy is under transition in China.The thesis will study the interest rate effectiveness of monetary policy from microeconomic perspective,which researches how credit constraints of small and medium-sized enterprises influence the interest rate effect of monetary policy.The thesis is divided into six parts: The introduction part illustrates the influence of credit constraint of small and medium-sized enterprises to interest rate effectiveness of monetary policy.Western scholars hold that credit rationing of commercial bank hinders monetary policy affect small and medium-sized enterprises through interest rate while Chinese scholars analyze monetary policy interest rate effect based on financing constraint of SMEs,coexist of regulated interest rate and market interest rate and shadow banking system.The second part summarized related theories on monetary policy interest rate transmission process and the influence factors.Mckinnon-Shaw model described how regulated interest rate affect savings,investment and economic growth.IS-LM model illustrates how monetary policy influence investment and consumption,and the output through interest rate in perfect market while CC-LM model studied how monetary policy affects real economy through commercial banks.The third part illustrated how China selects interest rate transmission mechanism of monetary policy and the status quo of credit constraints of the small and medium-sized enterprises.The fourth part is about empirical analysis on how monetary policy influences real economy based on VAR model with four variables,i.e.M2,loans,1-year benchmark lending rates and fixed assets investment.The empirical result shows that M2 and loans are more effective to real investment than interest rate,which means monetary policy interest rate transmission mechanism was hindered in China.The fifth part summarizes how small and medium-sized enterprise credit constraints impede monetary policy interest rate transmission to real economy and put forward policy suggestions.The last part summarizes the whole thesis.The thesis shows it's difficult for monetary policy affect real economy through interest rate.Credit rationing from commercial banks to small and medium-sized enterprises hinders monetary policy interest rates transmission effect in China.