The Study Of The Impact Of Interest Rate Liberalization On The Effectiveness Of China's Monetary Policy

With the continuous development of domestic market economy,Chinese economy is now in a critical period of market-oriented interest rate reform.In our research,market-oriented interest rate reform is an important economic background.The monetary policy and the fiscal policy are two important methods used by the government for macro-control of economic.For the monetary policy,interest rate transmission channels have played a very important role in the effectiveness of the policy.With the development of market-oriented interest rate reform and the diversification of market interest rates,the effect of interest rates on the economy is much different from the traditional economics theory.How does the interest rate marketization reform affect the transmission of monetary policy? What is the relationship between the transmission and the availability of monetary policy? What is the final influence of interest rate marketization reform on the economy? The above questions would be discussed in this paper.We reviewed some reports about the marketization of interest rate and monetary policy effectiveness from many countries.The study was focused on the following aspects: Firstly,the effectiveness of monetary policy can be measured by economic growth.The method of measurement is the contribution rate of the interest rate to economic growth after the economic shock.Secondly,interest rate marketization can improve the effectiveness of monetary policy,which was mainly measured by the flowing of the interest rates in monetary policy transmission channels.Thirdly,there is not only one measurement the effectiveness of the monetary policy.The four main goals of monetary policy should be used to determine whether interest rate marketization reform can promote the effectiveness of the monetary policy.In this paper,we explained the influence of interest rate marketization on the effectiveness of monetary policy from the traditional Keynes theory and the new theory of Keynes for micro angles.In the pathway,the interest rate market mainly through the influence on three kinds of transmission mechanism to influence theeffectiveness of monetary policy,the interest rate transmission mechanism,credit transmission mechanism and the conduction mechanism of the exchange rate,and then get in the empirical analysis and measurement of the conclusion and suggestions.we could draw conclusions and provide advises from the empirical data and econometric analysis.Based on the available data of reviews and theoretical analysis,we analyzed the gross domestic product(GDP),fixed asset investment,total retailing of social consuming goods,money supply and interest rate data.Firstly,we analyzed the present and the past of the interest rate marketization and monetary policy and found three main stages of the interest rate market-oriented reform.Using the new Keynes model theory,we explained how the changes of rates affect the monetary policy.Then,we further analyzed the effect of interest rate market-oriented reform on the effectiveness of monetary policy,using the vector model and the economic variables of twenty years of quarterly data(1996-2015).We also analyzed the relationship and influence of each other using the impulse response function and variance decomposition analysis.Finally,we conclude that the interest rate marketization reform can improve the effectiveness of monetary policy.We also analyzed the contribution rate of interest rate changes to GDP and other economic variables.Based on our conclusion,we could provide some policy suggestions to make the interest rate marketization reform benefit macro economy and to prevent risks caused by the interest rate.