Search results for " interest rates"
showing 10 items of 18 documents
Another "French paradox": explaining why interest rates to microenterprises dit not increase with the change in French usury legislation
2015
Conventional wisdom indicates that the growth of credit may not materialize if credit rates remain capped by usury laws, as had long been the case in France. France therefore abolished usury ceilings on loans to microenterprise in an effort to increase financing for microentrepreneurs. This should have led to an increase in interest rates and increase in microcredit. However, we do not find any increase in interest rates and this is therefore a paradox. The paper provides a brief literature review and the salient features of the legislative changes in France. It follows this up with a presentation of interest rate movements. The discussion of possible explanations of the paradox includes cl…
- EL EFECTO FISHER Y LA PARIDAD DE INTERÉS REAL. EVIDENCIA PARA LA ECONOMÍA ESPAÑOLA
1999
This paper provides an empirical test of the Fisher effect and of the real interest parity. The objetive is to determinate the behavior of the ex-ante real interest that condicionate the intertemporal savings and investment decisions. The method used is the time series properties of the data, which allows to separate estimation of the long-run equilibrium relationship from the nuisance parameters that characterize the short-run dynamics. The results find support inthe long run for a tax-adjusted Fisher hypothesis but not for the real interest parity. En este trabajo se contrasta empíricamente el cumplimiento de la hipótesis de Fisher y de la paridad de interés real para el caso español. El …
World Interest Rates and Inequality: Insight from the Galor - Zeira Model
2018
In this paper, we study the relationship between changes in the world interest rate and within-country inequality during the 1985–2005 period in which the world interest rate sharply declined. In line with the predictions of the seminal model of Galor and Zeira [Income distribution and macroeconomics. Review of Economic Studies 60, 35–52], the analysis suggests that the decrease in the world interest rate is associated with a decrease in inequality in poor countries and an increase in inequality in rich ones.
Impacts of sovereign risk premium on bank profitability: Evidence from euro area
2021
We analyse the effects of low and negative interest rates and sovereign risk premium on bank profitability among 154 Eurozone banks during the period 2005–2019. In contrast to some of the results in the previous literature, we find that the euro area banks have not suffered too much from the extremely low and negative interest rate era regarding their net interest margins. However, the overall profitability has lowered clearly during the sample period, and the sovereign risk premium has a robust negative effect on all the overall profitability measures, both with risk-adjustment and without it, but it seems to have an increasing effect on the degree of wholesale funding and loan loss provis…
Keep the faith in banking : New evidence for the effects of negative interest rates based on the case of Finnish cooperative banks
2021
This paper analyses the profitability of Finnish cooperative banks during the period of negative nominal interest rates. Contrary to expectations, the continuous decline in money market interest rates between 2009 and 2014, and the following negative rate era, did not have adverse effects on the profitability of banks at the beginning of negative interest rate period. Based on especially using a risk-adjusted measure for bank profitability, these results contrast with previous findings. In our findings, the increasing wholesale funding (WSF) ratio seems to be an important factor. However, after 2017 the banks have not been able to improve especially their risk-adjusted profitability so stro…
Stock market information and the relationship between real exchange rate and real interest rates
2013
In this paper we propose to augment the traditional relationship between real exchange rates and real interest rates (RERI) by adding the stock market equilibrium condition to it. We introduce the relative dividend yield as the new information variable. In the empirical analysis we use recent monthly observations from the U.K., Japan, Canada and Eurozone, all relative to the U.S. We show that the introduction of stock market information is highly relevant for the functioning of the RERI hypothesis. Based on the results from the cointegration analysis the role of relative stock market performance is especially important in the short- term (3 month) horizon, where the augmented RERI represent…
Money and the natural rate of interest: structural estimates for the United States and the Euro area
2008
We examine the role of money, allowing for three competing environments: the New Keynesian model with separable utility and static money demand; a non-separable utility variant with habit formation; and a version with adjustment costs for holding real balances. The last two variants imply forward-looking behavior of real money balances, as it is optimal for agents to allow their forecast of future interest rates to affect current portfolio decisions. We distinguish between these specifications by conducting a structural econometric analysis for the U.S. and the euro area. FIML estimates confirm the forward-looking character of money demand. Using these estimates we find that, in response to…
Unconventional monetary policy reaction functions: evidence from the US
2020
Abstract We specify unconventional monetary policy reaction functions for the Fed using linear and nonlinear econometric frameworks. We find that nonstandard policy measures are largely driven by the dynamics of inflation and the output gap, with the effect being particularly strong during QE rounds. Moreover, we uncover the presence of asymmetry and regime dependence in central bank’s actions since the global financial crisis, especially concerning the response of the term spread and the shadow short rate to the growth rate of central bank reserves. From a policy perspective and given the lack of a systematic response of monetary policy to asset price growth in nonstandard times, our findi…
Interest rate co-movements, global factors and the long end of the term spread
2012
The disconnect between rising short and low long interest rates has been a distinctive feature of the 2000s. Both research and policy circles have argued that international forces, such as global monetary policy (e.g. Rogoff, 2006); international business cycles (e.g. Borio and Filardo, 2007); or a global savings glut (e.g Bernanke, 2005) may be responsible. In this paper, we employ recent advances in panel data econometrics to document the disconnect and link it explicitly to the existence of a global latent factor that dominates the long end of the term spread for the recent period; the saving glut story emerges as the most likely contender for the global factor.
Domestic vs. International correlations of interest rate maturities
2010
The association between long and short interest rates is traditionally envisaged from a purely domestic perspective, where it is believed an empirical regularity. Hence, the weakening of this relationship in the first half of the 2000s has represented a conundrum, calling for a reassessment of the term structure and the conduct of monetary policy. Some commentators have called for investigations into the international dimension of this puzzle. Hence, in this paper we employ recent advances in panel data econometrics to investigate the co-movement of interest rate maturities both at the domestic and international levels for a sample of industrial countries. Specifically, we use the Ng (2006)…