"Liquidity trap" of the monetary policy refers to the weak effect of monetary policy when the nominal interest rate is near zero. In recent years, China's nominal interest rate has experienced drastic vibrations. We have to use the monetary demand function with random coefficient to estimate the dynamic elastic coefficient. By judging the elasticity of nominal interest rate, we can tell the effect of the interest rate policies. The empirical test shows that currently in China there is no " liquidity trap" of monetary policies so in this process of macro-economic control nominal interest rate is still one of the major tools of monetary policy.

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