The Positive Research of Nominal Interest Rate and the Economic Fluctuation of China
|School||Dongbei University of Finance|
|Keywords||Nominal Interest Rate Economic Fluctuation Financial Accelerator DSGE Model Bayesian Estimation|
Since 1990s, the mode of Chinese monetary policy was modified from direct control to indirect control and the policy instruments were changed from credit scales to interest rates, money supplies, open-market operations and so on in order to stabilize the price and the macroeconomic fluctuations. The economy has grown rapidly and the fluctuations were smoother than before since then. Although the economic growth rate begun to decrease which impacted by the Global Economic Growth, the macro economy has recovered gradually result from the 4000 billions RMB economics stimulus plan. And the rapid rise over the same period of PPI from Apr.2009 to Mar.2010 leads to the expectations of interest rate increases more strongly in the market.In this dissertation, DSGE model is used to explain the transmission mechanism and simulate the policy effect of nominal interest rate increase in this dissertation. This aims to provide theoretical and empirical support for the central bank of China monetary policy.Specially speaking, the research design of this dissertation spreads in turn according to the general research steps of modern macroeconomics. The first step is the research basement. In the stage, the literatures associated with the financial accelerator are reviewed and the entry-point and extension direction of the dissertation are found. In the second step calibration is used to simulate the effects to main macroeconomic variables and different type enterprises caused by the increase of nominal interest based on the financial accelerator model with heterogeneous enterprises. In the third step Bayesian method is used to test and verify the simulation result according to the economic data of China. The dissertation is divided into five parts specifically.The first chapter is introduction which discussed some basic issues such as research background, topics value, research focus and research objectives.The second chapter is literature review. The development process of the financial accelerator is reviewed and the problems and limitations in the current research are summarized in order to find out the innovations of this dissertation.The third chapter is the positive analysis of the financial accelerator model with heterogeneous enterprises. The nominal interest rate transmission mechanism is explained by the model which is composed of five sectors:the household, the intermediary enterprise, the financial intermediary, the retailers and the government. After solving the model, the impulse respond functions are used to simulate the real economy. The conclusions are that there is significant financial accelerator in the economy and the small and medium-sized enterprises responded more strongly than the state-owned enterprises.The fourth chapter is the empirical analysis of the financial accelerator model with heterogeneous enterprises. In this chapter, Bayesian estimation and the economic data of China are used to test and verify the conclusions that Chapter Three get.The fifth chapter is conclusions and policy recommendations. The conclusions of this dissertation are as follows. First, there is significant financial accelerator in the economy of China. Second, the small and medium-sized enterprises responded more strongly than the state-owned enterprises when the nominal interest rate is changed. Based on the above conclusions, the policy recommendations of the dissertation are: First, the monetary policy strength should be chose cautiously and the transparency of the policy should be kept in order to stabilize the price level, and at the same time avoid strong fluctuations of the macro economy. Second, the policy focus should be clarified, the different monetary policies should be made and the assistant strength to small and medium-sized enterprises should be enhanced. The main innovations of this dissertation are as follows. First, the micro foundations of household in BGG (1999) are improved which makes the logic of the model more rigorous. Second, the heterogeneous enterprises are introduced to the financial accelerator model normatively which can be referred by other researchers in the future. Third, the Bayesian method is used to estimate the DSGE model which is the improvement and the complement of the application of financial accelerator theory.Because of the limitations of the statistical data, the time period is so short that the estimation results and dynamic features of the model might be affected. Besides the data problem, the financial accelerator of household or a more complicated bank system can be considered in the future research, both of which are the extension and expansion direction for further studies.