Li Suyuan

Ocean University of China Qingdao, China

Wuhan

Ocean University of China Qingdao, China

Interest rate uncertainty, Investment and their relationship on diFFerent industries; Evidence from Jiangsu, China

Adnan Khurshid

Ocean University of China. Qingdao, China

adnankhurshid83@gmail.com

Abstract. The aim of this study is to investigate the impact of real interest rate on investment level on different industries of Jiangsu, China over the period of 10 years from 2003 to 2012. The effect of interest rate on investment in different industries is tested by using static and dynamic panel-data model. The empirical evidences indicated that interest rate and investment are positively correlated. However, interest rate uncertainty has small impact on rate of investment in different industries. Industries like manufacturing, power, gas, and water industry, finance and real estate are more sensitive to interest rate fluctuation. Furthermore, evidence indicated that sensitivity of interest rate on investment is also low.

It is suggested that government should accelerate the pace of interest rate liberalization and improve the sensitivity of investment to interest rate. The government should encourage rate sensitive industries in province.

Received: March, 2015

1st Revision: May, 2015

Accepted: July, 2015

DOI: 10.14254/2071-

8330.2015/8-2/7

JEL Classification: E40, E20, C22

Keywords: Interest rate; investment; Jiangsu Province; panel data model