Search results for "Interest"
showing 10 items of 624 documents
Integration and competition in the European financial markets
2007
Financial integration in Europe should affect the competition between markets and intermediaries and generate a convergence of both interest rates and margins among the different countries. This paper analyses the evolution of the convergence in interest rates and the level of competition and its inequalities among the European banking systems for the period 1993 to 2001. The inequality index used ?the Theil index- allows us to break down the inequalities so that the importance of either a country effect or a specialization effect is quantified. If the former effect dominates it would mean that the national banking markets are segmented as a consequence of the existence of obstacles or barr…
On the international co-movement of natural interest rates
2022
Using quarterly data for 10 OECD countries and the Euro area and a Kalman filtering technique, we investigate the international co-movement among natural interest rates. We show that the US is the main source of global spillovers and global/common factors appear to be key drivers of such co-movement. Indeed, global liquidity is a net transmitter of shocks, while quantitative easing (QE) and the US Dollar are net recipients of shocks. We also find that total spillovers among natural interest rates have been rising since the late nineties, spiking at around economic re-cessions, periods of US monetary policy tightening, the global financial crisis and the Eurozone sovereign debt crisis. From …
Oil prices and Spanish competitiveness
2002
Abstract This paper tries to find, using panel cointegration techniques, the factors explaining the real exchange rate of the Spanish peseta following the monetary approach to exchange rate determination developed in Meese and Rogoff (1988). In addition to the real interest rate differential, the real oil price (adjusted accounting for the relative oil dependence of the countries considered) is included as one of the main long-run determinants. The results are favorable to this simple model, stressing the role played by both, demand and supply factors, to explain the behavior of the peseta real exchange rate. However, the results are not homogeneous in the case of the real oil prices: this …
Changes in determinants of the interest margin in today’s economy
2019
This study examined the interest margin following the significant drop in its contribution to credit institutions’ total income. Balance sheet variables, income statement and annual report variables, and external variables were studied separately. Variables that had not previously been studied in the literature were considered, and determinants that had already been studied were revisited after the reduction in the interest margin. The diversification of investment in associated companies and investment in fixed and variable income are causes of this decrease in the interest margin. Higher fees and commissions offset this decrease. Greater size and market power have reduced the interest mar…
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…
TESTING FOR REAL INTEREST RATE PARITY USING PANEL STATIONARITY TESTS WITH DEPENDENCE: A NOTE*
2009
In this paper we test for real interest parity (RIRP) among the 19 major OECD countries over the period 1978:Q1–2006:Q1 using both short- and long-run definitions of interest rates. Once the independence hypothesis is rejected among these series, we test for RIRP using panel data unit root and stationarity tests based on common factor models that allow for pervasive forms of dependence. Our results indicate that there is no evidence in favor of the weak version of the RIRP since one of the common factors that have been estimated is non-stationary.
Nonlinear dynamics of interest rate and inflation
2004
According to several empirical studies, US inflation and nominal interest rates, as well as the real interest rate, can be described as unit root processes. These results imply that nominal interest rates and expected inflation do not move one-for-one in the long run, which is not consistent with the theoretical models. In this paper we introduce a nonlinear bivariate mixture autoregressive model that seems to fit quarterly US data (1952 Q1 – 2000 Q2) reasonably well. It is found that the three-month treasury bill rate and inflation share a common nonlinear component that explains a large part of their persistence. The real interest rate is devoid of this component, indicating one-for-one m…
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…
Linear and nonlinear interest rate sensitivity of Spanish banks
2011
Abstract Interest rate risk is one of the major financial risks faced by banks due to the very nature of the banking business. The most common approach in the literature has been to estimate the impact of interest rate risk on banks using a simple linear regression model. However, the relationship between interest rate changes and bank stock returns does not need to be exclusively linear. This article provides a comprehensive analysis of the interest rate exposure of the Spanish banking industry employing both parametric and non-parametric estimation methods. Its main contribution is to use, for the first time in the context of banks’ interest rate risk, a nonparametric regression technique…
Regional effects of monetary policy in the U.S.: An empirical re-assessment
2020
Abstract This paper provides an empirical re-assessment of the regional effects of monetary policy in the U.S. We use the narrative series of Romer and Romer (2004) as a measure of monetary policy shocks and impulse response functions estimated directly from a single equation spatial model. We find that monetary policy tightening leads to a persistent decrease in regional real personal income and employment, with asymmetric effects across regions that are magnified by spatial spillovers. The magnitude of the effects depends on the period under analysis and on the direction of the monetary policy shock. We also provide evidence of the existence of the interest rate and the housing market cha…