Real Interest Rates Movements in China - Coursework Example

It is commonly perceived that the increase in real interest rates may negatively impact the growth of the economy. The reason may be that the higher real interest rates may effectively increases the cost of funds (Dotsey , 1998). The increase in real interest rates, however, has both positive and negative impacts on the economy because for some countries it may attract investors because of increase in investment returns, whereas, for other countries it may increase the cost of funds borrowed. The purpose of the paper is to evaluate the impact of real interest rates on the economic growth of China.

The reason for the selection of China is that the china’s economy is considered as highly competitive internationally. Moreover, despite of being a developing nation, China’s impact on international financial market in terms of trade is significant. In addition to this, study of the impact of real interest rate instead of nominal interest rate on economic growth of China, may give more accurate results of the relationship because real interest rate is a pure single factor. The aim of the research provides a road map of study and helps the researcher to list down the goals he wants to achieve from the result (Munhall & Chenail, 2008).

The goal of research is “To Analyze the contribution of real interest rates towards the economic growth of the China”. The goal of the research clearly indicates that the paper is based on the evaluation of the significance of relationship between the two factors i.e. real interest rates and the economic growth of China. The objectives of the research are determined in a way that break downs the aim of the research to make the analysis more objective and focused and to answer the questions with the help of scientific procedure (Kothari, 2004, p. 2).