Search results for " interest rate"
showing 10 items of 56 documents
World Interest Rates, Inequality and Growth: an Empirical Analysis of the Galor-Zeira Model
2014
Following Galor and Zeira (1993), we study the effect of the world interest rate on inequality and growth for the period 1985-2005, characterized by falling world interest rates and cross-country income polarization. We argue that the two phenomena are related on th e basis of the following findings, which are in accordance with the predictions of the Galor and Zeira model: 1) a reduction of the world inter est rates increases inequality in rich countries and decreases inequ ality in poor countries; 2) inequality has a negative (and significant) eff ect on human capital accumulation in rich countries and a positive (b ut mostly not significant) effect in poor countries; 3) human capital po …
US stock market sensitivity to interest and inflation rates: a quantile regression approach
2016
ABSTRACTThis article studies the sensitivity of the US stock market to nominal and real interest rates and inflation during the 2003–2013 period using quantile regression (QR). The empirical results show that the stock market has a significant sensitivity to changes in interest rates and inflation and finds differences across sectors and over time. Moreover, the effect of changes in both interest rates and inflation tends to be more pronounced during extreme market conditions, thus distinguishing expansion periods from recession periods.
Growth, inflation and the exchange rate regime
1996
Abstract According to the Balassa-Samuelson effect, growth and inflation are positively correlated in economies with pegged currencies. This paper shows that the costs of inflation on long-term growth are underestimated in samples that include countries and periods with fixed exchange rate regimes.
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…
How does monetary policy respond to the dynamics of the shadow banking sector?
2020
We investigate the response of the central bank to the change in size of non-bank financial intermediaries. Using quarterly data for the U.S. over the period 1946:Q1-2016Q4, we find that when faced with an increase in the asset growth of the securities' brokers and dealers and the shadow banking sector, the monetary authority reacts by raising the short-term nominal interest rate. This response is stronger in the case of sharp variation in the size of the balance sheet of nonbank financial intermediaries. From a policy perspective, our study suggests that an extended version of the original Taylor rule - embedding both price stability and financial stability concerns – provides a good chara…
Some new results on interest rate rules in EMU and in the US
2000
Abstract This paper offers two new results on interest rate rules. First, we show that the empirical evidence from 1970 onwards for the US is compatible with a Taylor rule when we consider the possibility of changes in the inflation target and in the real interest rate. Second, recursive estimates of a forward-looking version of the Taylor rule for EMU confirm an increasing weight for inflation in the area, possibly as a consequence of the EMS, and, furthermore, a convergence in the nineties to the German value observed for the whole period. This process has coincided with an important reduction in the deviation of inflation across EMU countries. The results also show that credibility probl…
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.
Labour Market Institutions and Inflation Differentials in the EU
2015
Adopting a simple Phillips curve framework, we show that different labour market institutions across EU countries are associated with significant differences in the response of inflation to unemployment and exchange rate shocks. More wage coordination and higher union density flatten the Phillips curve and increase the inflation response to the real exchange rate, i.e. the exchange rate pass-through. In addition, using a new approach to the classification of goods and services as "traded" or "non-traded", we show that both these institutional effects are significantly stronger for the more exposed (traded) sector.
Effects of Fiscal Stimulus in Structural Models
2010
The paper assesses, using seven structural models used heavily by policymaking institutions, the effectiveness of temporary fiscal stimulus. Models can, more easily than empirical studies, account for differences between fiscal instruments, for differences between structural characteristics of the economy, and for monetary-fiscal policy interactions. Findings are: (i) There is substantial agreement across models on the sizes of fiscal multipliers. (ii) The sizes of spending and targeted transfers multipliers are large. (iii) Fiscal policy is most effective if it has some persistence and if monetary policy accommodates it. (iv) The perception of permanent fiscal stimulus leads to significant…
A Small Forward-Looking Macroeconomic Model for EMU
2001
In this paper we estimate a small forward-looking macroeconomic model for EMU which allows us to analyze the transmission mechanism of the monetary policy implemented by the European Central Bank through an interest rate rule that stabilizes inflation and output. The estimation of this model, which comprises forward-looking versions of the IS and the Phillips curves as well as the interest rate rule, is conducted by GMM using quarterly data from 1986 to 2000. We find that this simple model matches the dynamic properties of the output gap, inflation and the interest rate in EMU quite accurately. We also perform several exercises that show the response of output, inflation and interest rates …