Influential Article Review - Exploring the Interdependence of Interest Rate Liberalization and Monetary Policy Rates

Abstract

This paper examines finance. We present insights from a highly influential paper. Here are the highlights from this paper: We examine whether the effectiveness of the monetary policy rate transmission differs before and after interest rate liberalization in China using the autoregressive distributed lag (ARDL) bound test and an error correction model (ECM). The results show that after liberalization the mark-up is lower, and both the long-run and short-run interest rate pass-through has become faster and more complete. We attribute our findings to the ongoing reforms of China’s banking system, which has improved the competitiveness of Chinese commercial banks. For our overseas readers, we then present the insights from this paper in Spanish, French, Portuguese, and German.