Research on the Influence of Central Bank Financial Strength on the Deviation of Interest Rate under Taylor Rule

• 1、Finance and statistics School,Hunan University

Abstract：As an important indicator of the implementation effect of the central bank\'s safeguarding monetary policy, will the financial strength of the central bank be affected by changes in the balance sheet, and will it affect the degree of deviation of the interest rate under the Taylor Rule? From the perspective of the central bank\'s balance sheet, this paper establishes two kinds of financial strength indicators that include the seigniorage tax revenue or not. The error correction model is used to analyze the impact of changes in the balance sheet structure on financial strength and the impact of financial strength on the degree of deviation under the Taylor Rule.The result shows that increasing the proportion of foreign exchange accounts and the use of unconventional monetary policy instruments would increase narrow financial strength but weaken the general financial strength. The central bank\'s financial strength will negatively impact the degree of interest rate deviation, but the general financial strength of the central bank will have a longer-lasting impact on the deviation from interest rates. Therefore, when implementing monetary policy, the central bank should strengthen financial management and minimize the deviation of interest rates.

Keywords： central bank balance sheet central bank financial strength interest rate deviation