Management Review

›› 2020, Vol. 32 ›› Issue (4): 48-63.

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Correlation Mechanism: Theoretical Derivation and Empirical Test

Yuan Sisi1, Song Yinqiu1, Lv Ping2, Wang Deqing1   

  1. 1. School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190;
    2. School of Management, University of Science and Technology of China, Anhui 230026
  • Received:2019-03-22 Online:2020-04-28 Published:2020-05-07

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Abstract:

This paper divides the interest rate transmission mechanism into two processes, and systematically studies the transmission of SLF as the interest rate corridor. These two processes are:(1) SLF as the upper limit of the interest rate corridor to the market interest rate; and (2) the medium-term and long-term transmission channel that is further transmitted to financial assets such as the bond market through medium-term lending. By establishing a general equilibrium model and numerical simulation, the validity of the long-term and short-term mechanism of interest rate conduction is theoretically demonstrated, and the conclusion is that the short-term conduction is more effective than the long-end. According to this, this paper uses the monthly data of 2015-2018 to empirically analyze the long-term and short-term interest rates conduction effects in China's current economic conditions, which proves that both are effective, but short-end conduction has a certain time-delay effect. It is suggested that the central bank should promptly streamline the interest rate transmission mechanism, so as to improve the implementation effect of monetary policy.

Key words: interest rate corridor, long-term and short-term interest rate transmission mechanism, general equilibrium model, empirical analysis