2.2金融货币.pptVIP

But why interest rate fluctuate over the time? What factors determine the behaviour of interest rate? In this class we are going to see how the overall level of nominal interest rate is determined. First let’s see how economist tries to answer this question. We have learned in our last class that interest rate is negatively related to bond price, so if we can explain why bond prices change, we can also explain why interest rates fluctuate. The economist use demand and supply analysis to explain why bond prices change. As bonds are a kind of asset, they do this by examining the demand for asset. That is they are trying to figure out what factors influence people’s decision of how much they are going to invest in a certain asset. So in summary, to study the behaviour of interest rate, economist study demand and supply for an asset, then demand and supply for bond which will finally give them clues for the bond prices and then interest rate at the end. However, before we start we need to know that there is an assumption for our analysis. Since all interest rate tend to move together, if we investigate the behavior of one interest rate and this can explain all others. Therefore, to make things simple, we assume there is only one bond instrument and one interest rate. 假设市场上只有一种债券。 * * We will start from thinking about what are the important factors that determine the demand of an asset. That is, when people are faced with the questions of whether and how much he would invest in a certain asset relative to another, they must consider at least four factors: The first factor is wealth or the total resources owned by the individual. When our wealth increase, holding everything else unchanged, our demand for purchasing assets increases. The second factor is expected return, which measures how much we gain from holding that asset over the next period. People have the intention to hold assets that have a higher expected return. Another thing they consider is ris