Interest Rate Determination in China: Past, Present, and Future
Dong He,
Honglin Wang and
Xiangrong Yu ()
Additional contact information
Honglin Wang: Hong Kong Institute for Monetary Research
No 42014, Working Papers from Hong Kong Institute for Monetary Research
Abstract:
How should we think about the determination of interest rates in China after interest rate liberalisation? Would effective deposit rates, lending rates and bond yields move higher or lower? We argue that interest rates in a liberalised environment would need to be anchored by the conduct of monetary policy. If monetary policy is to achieve the objective of price and output (or employment) stabilisation, the policy rate should be set close to China's equilibrium or natural rate. We sketch three preliminary approaches to estimation of the natural rate in China. Based on these we argue that interest rates on large deposits in the banking system and short-term money market rates would likely to move higher following interest rate liberalisation. The effect on effective lending rates is somewhat ambiguous as the contestability of the banking sector and the competition in bond markets are likely to increase after interest rate liberalisation. We leave the determination of the curvature of the yield curve to future research.
Keywords: Interest Rate; Monetary Policy; Economic Reform; Chinese Economy; The People¡¦s Bank of China (PBC) (search for similar items in EconPapers)
JEL-codes: E43 E52 O53 P24 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2014-02
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)
Downloads: (external link)
http://www.hkimr.org/uploads/publication/375/wp-no-04_2014-final-.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.hkimr.org/uploads/publication/375/wp-no-04_2014-final-.pdf [301 Moved Permanently]--> http://www.aof.org.hk/research/HKIMR/uploads/publication/375/wp-no-04_2014-final-.pdf [301 Moved Permanently]--> https://www.aof.org.hk/research/HKIMR/uploads/publication/375/wp-no-04_2014-final-.pdf)
Related works:
Journal Article: Interest Rate Determination in China: Past, Present, and Future (2015) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:hkm:wpaper:042014
Access Statistics for this paper
More papers in Working Papers from Hong Kong Institute for Monetary Research Contact information at EDIRC.
Bibliographic data for series maintained by HKIMR ().