Empirical Relationship between Interest Rate Policy and Price Stability

In last two years, people have paid more and more attentions to price fluctuations. China Centre Bank frequently uses the approach of adjusting interest rates to influence price fluctuations. This article will introduce a monetary policy model that covers different time periods, different types of interest rates and policy disturbances. It also depicts durative and directional track of interest rates impulse in the decade. And it evaluates how strong and how timely prices index reacts to interest rate policy. Finally this article does dynamic analysis on the impulse disturbance.