Abstract:
The paper readjusts the H-S interest margins decision model based on the special background of interest rate liberalization in China. Constructing the interest rate liberalization index as a proxy variable to measure the process of interest rate, the article carries out empirical analysis by using panel data of 45 commercial banks from 2003 to 2014 to discuss the influence of interest rate liberalization on the interest margins of commercial banks. The result shows that the interest rate liberalization does have an impact on interest margins of commercial banks, but the relationship between them is nonlinear. It presents an inverted U-shaped relationship. Generally speaking, with the deepening of interest rate liberalization, the interest margins of commercial banks increase at first and then decrease.
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