TITLE:
Analysis of the Effect of the Changes of Interest Rates on the General Profit Rate in China
AUTHORS:
Jianjun Zou, Jinshan Liu
KEYWORDS:
Interest Rate, General Profit Rate, SVAR, Impulse-Response, Variance Decomposition
JOURNAL NAME:
Modern Economy,
Vol.8 No.5,
May
22,
2017
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.