Analysis of the Effect of the Changes of Interest Rates on the General Profit Rate in China

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DOI: 10.4236/me.2017.85051    1,366 Downloads   2,385 Views  Citations

ABSTRACT

This article makes a macro-quantitative analysis on the relationship between the interest rate and the general profit rate, studies their interaction relationship in China from 1990 to 2014 with the Structural Vector Autoregressive (SVAR) model, and tests the erosion effect of the benchmark lending rate on the general profit rate. The results show that the changes of the benchmark lending rate have a significant negative effect on the general profit rate and the impulse response function analysis shows that the effect is enduring and lasts for 6 years; the variance decomposition results show that the changes of the benchmark lending rate have a high degree of explanation, and the final contribution rate is stabilized at approximately 33%. With a correct understanding of the interaction relationship between the interest rate and the general profit rate, we can adjust the interest rate policy to slow down the decrease in the general profit rate and then mitigate the negative effect of the decrease on economic growth.

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Zou, J. and Liu, J. (2017) Analysis of the Effect of the Changes of Interest Rates on the General Profit Rate in China. Modern Economy, 8, 726-744. doi: 10.4236/me.2017.85051.

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