The real interest rate anchor in the regulation and control of the price-based monetary policy


LI Hongjin;SU Naifang;HONG Hao


China Finance 40 Forum;Operations Office of the People’s Bank of China;Operations Office of the People’s Bank of China;Institute of Finance of the People’s Bank of China


With a basic liberalization of interest rate control, monetary policy needs to transfer from the traditional quantity control towards price-based mode with interest rate as the base. As the real interest rate anchor for the regulation and control of price-based monetary policy, natural rate of interest will provide an important basis for the central bank to determine policy interest rate. Based on the new Keynesian general equilibrium model, and starting from the three-layer meanings of natural rate of interest, the paper estimates China’s natural rate of interest by establishing the state space model. The results show that China’s natural rate of interest may be used as a leading indicator for economic growth, providing a basis for explaining and forecasting the economic operation trend. The interest rate gap may not only be an “indicator” of economic fluctuation, but also offer an important basis for making and evaluating monetary policy, which has important reference for monetary policy transformation and macro-control under the new normal.


natural rate of interest;potential output;price-based monetary regulation and control;state space model


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Total: 49 articles

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