The Impact of Interest Rate Liberalization on Monetary Policy Effectiveness under Open Conditions

Under the complete capital mobility assumption and open conditions,through constructing,calibrating and simulating the New Keynesian dynamic stochastic general equilibrium model(DSGE),this paper analyses the impact of the interest rate marketization on the monetary policy effectiveness.The results show that firstly the interest rate marketization can better control the inflation,and with the interest rates rising,the output initial reaction to the domestic and oversea monetary policy shocks is weakened.Secondly,with the interest rate marketization,the domestic technology shock helps reduce the inflation and promote the economic growth.Thirdly,with the interest rate rising,for the output volatility,the explanation intensity of the technology impact gradually increases,while for the inflation volatility,the explanation intensity of the monetary policy impact gradually increases.Finally,as interest rates rise,the social welfare losses decline gradually.There exists an optimal interest rates level at which the welfare losses get to minimum.