Abstract: In this paper, the TVP-VAR model is firstly constructed to examine how changes in international payments affect interest rate evolution, and then the DSGE model of the two countries is constructed to explore the differential impacts of structural international payments shocks on interest rate evolution. It is found that the continuous accumulation of foreign exchange reserves caused by the deepening of opening-up does exert downward adjustment pressure on the interest rate. The surplus of international balance of payments is an important factor contributing to the formation of low interest rate in China, and the money supply is the important mediating variable. The impact of direct investment and portfolio investment shocks on interest rate is far greater than that of trade shocks. With the further promotion of capital account facilitation in the future, China's interest rate adjustment will be increasingly constrained by the fluctuations of balance of payments. Therefore, this paper argues that the government should further deepen the reform of the foreign exchange management system, gradually realize the "pooling of foreign exchange with the people", improve the independence of monetary policy to reduce the impact of foreign exchange market fluctuations on interest rate.

Key words: structural balance of payments, low interest rate, TVP-VAR model, two-country DSGE model