Savings (capital supply) and investment (capital demand) have great flexibility to the change of interest rate. In the long run, savings equals investment. Therefore, on the one hand, interest rate affects the current investment activities, on the other hand, it affects the future investment scale by adjusting savings. This role of interest rate was later brought into full play by Keynes and became the core of his famous "effective demand" theory. Keynes believed that the market price of bonds is inversely proportional to the market interest rate. If the interest rate rises, the bond price will fall. If interest rates fall, bond prices will rise. This relationship between interest rates and bond prices enables people to choose between currencies and bonds when arranging their financial assets in order to make profits. If the expected interest rate falls (that is, the bond price rises), people are willing to save less now and buy more bonds, so as to make a profit by selling bonds when the bond price rises in the future; On the contrary, the expected rise in interest rates makes people willing to save more money and less bonds, that is, to sell their bonds and convert them into money to avoid losses when bond prices fall in the future. From a macro perspective, the impact of interest rates on investors' behavior is manifested in the impact on investment scale and investment structure.
① Influence of interest rate on investment scale. The influence of interest rate on investment scale refers to the influence of interest rate as the opportunity cost of investment on the total social investment. In the case of constant investment income, the increase in investment cost caused by rising interest rates will inevitably make those investors with lower investment income withdraw from the investment field, thus reducing investment demand. On the contrary, lower interest rate means lower investment cost, thus stimulating investment and increasing total social investment. It is precisely because of this role that interest rates are regarded by western economic theorists and monetary authorities as an important indicator to measure economic operation and an important means to regulate economic operation. Therefore, since the Great Depression in 1930s, controlling the interest rate level once occupied a decisive position in the western monetary policy system.
After World War II, in order to resume production and stimulate rapid economic development, western countries invariably take economic growth and full employment as the main objectives of their economic policies. The reason why the low interest rate policy is widely adopted is that it is conducive to stimulating investment, expanding production scale and rapid economic growth, and it has indeed played a positive role in promoting economic development in the 20 years after the war. For example, throughout the 1950s and 1960s, the average annual gross national product (GNp) growth rate in the United States was around 4%. Japan has benefited more from the low interest rate policy. Enterprises use a large number of low-interest loans, reducing the interest burden, reducing product costs, increasing corporate profits, promoting corporate investment and accelerating industrial development. Japan's low interest rate policy has played an important role in the rapid growth of Japanese investment, rapid industrial development and the development of import and export trade.
Since 1970s, the balance of payments in western countries has been extremely unbalanced, and there has been widespread inflation. At the same time, the domestic economy gradually stagnated, forming a terrible "stagflation" situation. In order to alleviate the economic crisis, western countries have successively turned to high interest rate policies to reduce investment and curb inflation, which has achieved great results. The inflation rate in Britain dropped from 24.2% in 1975 to 8.6% in 1982, and then to 3.8% in 1988. Japan's inflation rate has also gradually decreased from 24.3% in 1974 to 0.5% in 1988.
It can be seen that the change of interest rate has a great influence on the investment scale and even the whole economic activity. This point is not only repeatedly emphasized by western economic theory, but also confirmed by practice.
② The influence of interest rate on investment structure. Investment structure mainly refers to the proportion of investment in various sectors of the national economy, industries and social production.
As a lever to regulate investment activities, interest rate not only determines the investment scale, but also the interest rate level and interest rate structure will affect the investment structure.
Generally speaking, the influence of interest rate level on investment structure must depend on the comparison between expected rate of return and interest rate. Funds tend to flow to investment activities with high expected rate of return, while investments with expected rate of return lower than interest rate are often unable to be carried out due to lack of funds. In the short term, the change of interest rate will lead to the adjustment of investment structure. The higher the interest rate, the more concentrated the investment is on short-term high-return projects.
The influence of interest rate on investment structure is mainly reflected in the interest rate structure. There are many kinds of interest rates in the real economy, which shows that the interest rate in economic life is not single, but a complex system. Classifying the interest rate system according to different standards will form different interest rate structures. If divided by borrowers, interest rates include bank interest rates, non-bank financial institutions interest rates, bond interest rates, market interest rates and so on. According to the loan industry, it can be divided into industrial loan interest rate, commercial loan interest rate and agricultural loan interest rate. According to the return cycle, it can be divided into six months, one year, three years, five years and eight years. The change of interest rate structure will directly affect the change of investment structure.
For example, the term structure of interest rate will affect the term structure of investment. If the long-term interest rate is too high, it will inhibit long-term investment and increase people's demand for short-term investment. On the contrary, if the short-term interest rate is too high and the long-term interest rate is relatively low, it will stimulate long-term investment and turn some investment demand from short-term to long-term. For another example, in most developing countries, interest rates are controlled by the government, and the government sets different interest rates for different industries. The industry structure of this interest rate will also affect the investment structure. Therefore, it has become a common practice to implement the government's industrial policy by adjusting the industrial structure of interest rates. At the beginning of the People's Republic of China, we adopted an obvious differential interest rate policy according to different situations. The general principle is that the loan interest rate of private enterprises is higher than that of public enterprises, and that of commercial enterprises is higher than that of industrial enterprises. In order to support the development of public ownership economy, limit the speculative activities of private enterprises and establish the leading position of public ownership economy in the national economy. The purpose of giving preferential interest rates to industrial loans is to encourage rapid industrial development, limit commercial speculation, increase effective supply and curb abnormal demand at the same time, and make the market situation improve rapidly. The implementation of inter-industry differential interest rate policy has made industrial production grow rapidly in a short period of time, restricted private enterprises, and is conducive to the smooth progress of socialist transformation. Moreover, in the subsequent economic construction, differential interest rates will be implemented for investments in energy, transportation, communication and other industries 13 and some raw material industries listed in the national plan, as well as salt industry and agricultural infrastructure, so as to ensure investments in these sectors.
The function of interest rate adjustment economy is to restrain the total demand for resources and allocate limited resources to departments with higher capital profit rate. Structurally, this adjustment mainly adopts differential interest rate and implements interest rate reward and punishment system. We can use lower preferential interest rates to support the production of important industries, enterprises and short-term products, and we can also use higher interest rates and additional interest to curb the investment of some industries, enterprises and long-term products. This can adjust the industrial structure, enterprise structure and product structure. If differential interest rates are implemented among regions, industries and enterprises, it can also promote the transfer of funds among regions, industries and enterprises. However, the adjustment of interest rates often depends on a country's economic environment and conditions.
③ The role of interest rate adjustment. Generally speaking, interest rate changes mainly affect investment through the reaction of borrowers and borrowers to interest rate changes, but the role of interest rate is often limited by various factors, especially the changes in social average profit rate and social capital situation.
Because the actual return on investment depends on the comparison of profit and interest, the amount of investment depends not only on the level of profit rate and interest rate, but also on their relative level. It is likely that although the interest rate has dropped, the investment will not increase, because the profit rate has also dropped; In other words, although the interest rate has risen, the investment has not decreased, because the profit rate has also increased.
The status of social capital will also affect the role of interest rates. If there is a large amount of surplus capital, the reduction of interest rate will lead to the increase of investment. However, if capital is insufficient, even if interest rates are lowered, it is difficult to increase investment immediately.
The role of interest rates also depends on the perfection of financial markets. The more developed the financial market is, the more interest rate can reflect the relationship between supply and demand of market funds as a price signal, and at the same time, as a lever to adjust the economy, the easier it is for interest rate changes to act on the whole economy through the financial market.
It can be seen that the actual effect of interest rate regulation depends on the actual situation of a country's economic development. When the economy is prosperous, although interest rates rise, it is difficult to restrain the increase of investment; When the economy shrank, although the authorities lowered interest rates, it could not stimulate the increase of investment. Furthermore, the more developed a country's economy is, the more obvious the role of interest rates is; On the other hand, in underdeveloped countries, the more serious the interest rate distortion is, the adjustment effect on the economy will be lost.