The Formation Of Negative Interest Rate And Its Policy Enlightenment

Negative interest rate refers to the phenomenon that the real interest rate is negative after deducting the inflation rate from the nominal interest rate.From a dynamic perspective,the negative interest rate effect can also be described as the speed of bank interest rate change is less than that of price index,which is a special case that violates the economic laws.In this case,people are more willing to maintain the value of the existing assets by other channels rather than bank savings,such as investing in real estate,stocks,funds,and precious metals.If bank interest rate does not rise to normal level in the long term,it means that the bank savings will shrink for a long time,which will affect the normal operation of market economy.After the 2008 financial crisis,the world's six largest economies have begun to implement the negative interest rate policy,and many other countries have entered the era of low interest rates.As negative interest rates have aroused great attention in recent years,the research on the economic framework under the negative interest rate and the impact of economic elements on the negative interest rate is still very limited.Therefore,this dissertation is devoted to fill the gap.The research in this field is of great significance for us to understand economic operation and formulate reasonable monetary and fiscal policies.After reviewing the existing literature,in the model part,the author extends the classic OLG model and constructs the framework that can explain the cause of the negative interest rate.Results find out that the reduction of the rate of productivity growth and the aging of the population have led to the decline in interest rates,while the limit of loan and inflation allow the nominal interest rate stays at the zero lower bound.Thus,the real interest stays negative for a long time.In the empirical analysis part,in order to verify whether the foregoing factors can affect the interest rate,the author selects the economic data from 125 countries and regions for 26 years(1991 to 2016)as the sample for panel data analysis,collects and extracts the data by the principal component analysis method,and uses the random effect panel to construct a model.The author tests the model by three testing methods,namely total quantity test,component test and robustness test.In the component test,the authors sorts the sample according to the broad money growth rate,the population density and the government debt,so that the test results are more realistic and effective.It is proved that the decrease of productivity and the aging of population are the most crucial factors for the decline of interest rate.In the policy suggestion part,the author discusses the negative interest rate and high savings rates situation in China.The dissertation summarizes the problems of high risk in China's financial institutions,excessive investment of the government and the serious asset bubble,and puts forward several methods such as speeding up the innovation in research and development,perfecting the financial market system,establishing the social security system,and adjusting in industrial structure to overcome those issues.This study not only helps to instruct the government to formulate policies and investment decisions in theory,but also innovates in the research method for the future research on negative interest rate and economic growth.