scholarly journals German banks’ behavior in the low interest rate environment

2021 ◽  
Author(s):  
Ramona Busch ◽  
Helge C. N. Littke ◽  
Christoph Memmel ◽  
Simon Niederauer
Keyword(s):  
Interest Rate ◽  
Negative Impact ◽  
Mortgage Lending ◽  
Rate Level ◽  
Interest Income ◽  
Bond Portfolio ◽  
Rate Environment ◽  
Using Data ◽  
The Interest Rate ◽  
The Impact

AbstractUsing data from a quantitative survey of German banks at three points in time (2015, 2017 and 2019), we analyze the impact of changes in the interest rate level on banks’ net interest income and the countermeasures they take. A decline in the interest rate level has a more negative impact on net interest income, the longer the decline lasts and the lower the interest rate level is. This impact softens with increasing risk of changes in the present value of banking books. We do not find that banks generally increase their risks following a drop in income. However, poorly capitalized banks subsequently increase the credit risk of their bond portfolio. After a fall in operational income, banks increase their fee and commission income and reduce their costs. In addition, banks tend to extend their mortgage lending after a drop in their interest income.

scholarly journals A Tax-Based Estimate of the Elasticity of Intertemporal Substitution

2013 ◽  
Vol 03 (01) ◽  
pp. 1350001 ◽  
Author(s):  
Jonathan Gruber
Keyword(s):  
Time Series ◽  
Interest Rate ◽  
Interest Rates ◽  
Consumer Expenditure ◽  
Intertemporal Substitution ◽  
Tax Rate ◽  
Elasticity Of Intertemporal Substitution ◽  
Using Data ◽  
The Interest Rate ◽  
The Impact

One of the most important behavioral parameters in macroeconomics is the elasticity of intertemporal substitution (EIS). Starting with the seminal work of Hall (Hall, R., 1978, Stochastic Implications of the Life Cycle — Permanent Income Hypothesis: Theory and Evidence, Journal of Political Economy 86, 971–987), researchers have used an Euler equation framework to estimate the EIS, relating the growth rate of consumption to the after-tax interest rate facing consumers. This large literature has, however, produced very mixed results, perhaps due to an important limitation: The impact of the interest rate on consumption or savings is identified by time-series movements in interest rates. Yet the factors that cause time-series movements in interest rates may themselves be correlated with consumption or savings decisions. I address this problem by using variation across individuals in the capital income tax rate. Conditional on observable characteristics of individuals, tax rate movements cause exogenous shifts in the after-tax interest rate. Using data on total non-durable consumption from the Consumer Expenditure Survey over two decades, I estimate a surprisingly high EIS of two. This finding is robust to a variety of specification checks.

scholarly journals Inflation Instability Impact on Interest Rate in Egypt: Augmented Fisher Hypothesis Test

2017 ◽  
Vol 5 (1) ◽  
pp. 1 ◽  
Author(s):  
Doaa Akl Ahmed ◽  
Mamdouh Abdelmoula M. Abdelsalam
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Negative Impact ◽  
Hypothesis Test ◽  
Portfolio Theory ◽  
Expected Inflation ◽  
Fisher Hypothesis ◽  
The Interest Rate ◽  
The Impact ◽  
Autoregressive Conditional Heteroscedasticity

The paper aims at examining an augmented version of Fisher hypothesis that include inflation instability. According to this hypothesis, there is a positive relation between interest rates and expected inflation. In contrast, there is a debate regarding the impact of inflation uncertainty on interest rate. According to the portfolio theory and models of asset pricing, inflation instability positively affects the interest rate. The reason is that risk-averse investors must be compensated with higher returns for higher risks. In contrast, the loanable funds theory implies a negative impact of inflation instability and interest rates since high uncertainty leads consumers to protect themselves against inflation by raising their savings which lowers consumption and interest rates. To compute inflation volatility, we applied different Autoregressive Conditional Heteroscedasticity models. The simple and augmented versions of Fisher hypothesis are examined using Markov Switch Model to account for possible regime shift in that relationship. For the original Fisher hypothesis, there is an evidence of supporting it in the first regime while that hypothesis does not hold in the second one. In the augmented version of Fisher hypothesis, portfolio theory hypothesis is verified in the first regime whereas the loanable funds hypothesis is confirmed in the second one.

Does interest rate liberalisation affect the constancy of mean interest rates in China?

2020 ◽  
Vol 28 (4) ◽  
pp. 555-568
Author(s):  
Hui Hong ◽  
Zhicun Bian ◽  
Naiwei Chen ◽  
Chiwei Su
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Structural Breaks ◽  
Negative Impact ◽  
Financial Reforms ◽  
Inflationary Expectation ◽  
Content Type ◽  
The Mean ◽  
The Interest Rate ◽  
The Impact

Purpose This paper aims to examine the impact of interest rate liberalisation on the constancy of mean interest rates in China to test the effect of financial reforms and provide strategies for future practices. Design/methodology/approach Bai and Perron’s (1998, 2003) methodology is used to test for structural breaks in the mean of different interest rates using Chinese data, and break dates are measured against the exact dates of the interest rate liberalisation. The performance of mean interest rates across the regimes defined by liberalisation dates is also investigated. Findings The main results show that interest rates generally increase (decrease) after deregulations on lending (deposit) rates, but these changes are not significant to induce a negative impact on the domestic economy. Instead, the infrequent but important shifts (structural breaks) in mean interest rates are caused by factors other than liberalisation such as economic shocks, inflationary expectation and liquidity crunch in China. Originality/value To the best of the author’s knowledge, this paper provides unprecedented evidence on significant changes in interest rates attributable to the liberalisation within the Chinese context.

scholarly journals QUARTERLY ANALYSIS: The Progress of Monetary, Banking and Payment System Quarter III - 2011

2012 ◽  
Vol 14 (2) ◽  
pp. 103-105
Author(s):  
Author Team of Quarterly Report Bank Indonesia
Keyword(s):  
Interest Rate ◽  
Financial Market ◽  
Economic Performance ◽  
Negative Impact ◽  
The Other ◽  
Inflation Target ◽  
Inflation Expectation ◽  
Slowing Down ◽  
The Interest Rate ◽  
The Impact

The Board of Governor Meeting of Bank Indonesia on October 11, 2011 decided to lower the BI rate by 25 bps to the level of 6.5%. Bank Indonesia will also maintain the stabilization of Rupiah particularly from the impact of global financial market shock. The decision is in line with the inflation expectation of below 5% on current and next year. Furthermore, these policies are meant to anticipate and to mitigate the negative impact of the global economic and financial slowdown on Indonesian economy. Looking ahead, the Board of Governor will continue to evaluate the global economic and financial performance and use the interest rate as well as the mix of monetary and the other micro prudential policies to mitigate the possible slowing down of Indonesian economic performance, especially on achieving the inflation target of 5% + 1% in 2011 and 4.5% + 1% in 2012.

Examining the Asymmetric Impact of Monetary Policy in India

2017 ◽  
Vol 11 (3) ◽  
pp. 290-314 ◽  
Author(s):  
Jeevan Kumar Khundrakpam
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Negative Impact ◽  
Aggregate Demand ◽  
Jel Classification ◽  
Government Consumption ◽  
Policy Shocks ◽  
Significant Negative Impact ◽  
The Interest Rate ◽  
The Impact

Though an accumulating body of work has analysed monetary policy transmission in India, there are few studies examining the asymmetric aspect of the transmission. Against this backdrop, segregating the interest rate setting process captured by a Taylor rule type into unanticipated and anticipated components, this article analyses the asymmetric effects of monetary policy on aggregate demand and its components, and inflation in India using quarterly data from 1996–97Q1 to 2013–14Q3. It finds that unanticipated hikes and cuts in the policy rate have a symmetric impact on aggregate demand, but differentially impact the components. While the impacts on investment are negative and symmetric, they are asymmetric on private consumption, with only an unanticipated cut in policy rate having a significant negative impact. Government consumption is unaffected by monetary policy shocks. The impact of unanticipated interest rate changes on inflation is negative and symmetric. Anticipated policy rate changes also have a negative impact on aggregate demand and its components, except for government consumption, but between certain levels, such changes are ineffective, indicating a neutral impact. Anticipated policy rate changes have a negative impact on inflation at all levels. JEL Classification: C32, C51, E31, E52

scholarly journals Analisis Kredit Bermasalah, Tingkat Suku Bunga Dan Profitabilitas Pada PT. Bank Perkreditan Rakyat (BPR) KCP Limbanang Kabupaten Lima Puluh Kota

2021 ◽  
pp. 26-33
Author(s):  
Selvi Yona Sari ◽  
Muahammad Putra Pratama
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Positive Impact ◽  
Rural Credit ◽  
Nonperforming Loans ◽  
Interest Income ◽  
The Interest Rate ◽  
The Impact

This study aims to analyze problem loans, interest rates, and the impact on interest income in PT Bank Perkreditan Rakyat (BPR) KCP Limbanang, Lima Puluh Kota District. The research variables are Problematic Credit (x1), Interest Rate (x2), and Profitability (y). Based on the results of this study can be concluded that the level of nonperforming loans that occur at the Bank Perkreditan Rakyat (BPR) KCP Limbanang District Lima Puluh Kota from 2011-2012 the level of non-performing loans decreased compared to the previous year, it means the credit situation is getting better. The interest rate at Rural Bank of KCP Limbanang of Lima Puluh Kota District in 2011-2015 experienced fluctuations in the proof of the highest interest rate in 2011 and the lowest interest rate in 2015. Due to total assets in Rural Bank (BPR) KCP Limbanang District Lima Puluh Kota each year experienced a significant increase whereas profitability from the year 2011-2015 that experienced ups and downs of profitability, this is influenced by the rearrangement of terms and conditions of credit Rural Bank (BPR) KCP Limbanang District Fifty Cities.Finally, the authors suggest to Rural Credit Bank (BPR) Limbanang Kabupaten Lima Puluh Kota The level of nonperforming loans that occur in Rural Banks (BPR) KCP Limbanang District Lima Puluh Kota which continues to fall every year and also problem loans also below the maximum 5% have a positive impact on the bank, as well as an achievement for the bank as it can minimize nonperforming loans and due to improved supervision of good credit disbursement.

scholarly journals On The Contribution of Interest Expense (Income) on Total Output

2021 ◽  
Vol 4 (1) ◽  
pp. 31-56
Author(s):  
Ahmed Mehedi Nizam
Keyword(s):  
Interest Rate ◽  
Aggregate Demand ◽  
Total Output ◽  
Response Analysis ◽  
Panel Var ◽  
Intuitive Reasoning ◽  
Body Of Knowledge ◽  
Interest Income ◽  
Structural Panel ◽  
The Impact

Abstract A decrease in interest rate in traditional view of monetary policy transmission is linked to a lower cost of borrowing which eventually results into a greater spending in investment and a bigger GDP. However, a decrease in interest rate is also linked to a decrease in interest income which, in turn, affects the aggregate demand and total GDP. So far, no concerted effort has been made to investigate this positive inter-relation between interest income and GDP in the existing literature. Here in the first place we intuitively describe the inter-relation between interest income and output and then provide a micro-foundation of our intuitive reasoning in the context of a small endowment economy with finitely-lived identical households. Then we try to uncover the impact of nominal interest income on the macroeconomy using multiplier theory for a panel of some 04 (four) OECD countries. We define and calculate the corresponding multiplier values algebraically and then we empirically measure them using impulse response analysis under structural panel VAR framework. Large, consistent and positive values of the cumulative multipliers indicate a stable positive relationship between nominal interest income and output. Moreover, variance decomposition of GDP shows that a significant portion of the variance in GDP is attributed to interest income under VAR/VECM framework. Finally, we have shown how and where our analysis fits into the existing body of knowledge.

scholarly journals The impact of Musharakah financing on the monetary policy in the Islamic economy

2018 ◽  
Vol 3 (3/4) ◽  
pp. 139-152
Author(s):  
Hatem Adela
Keyword(s):  
Economic Theory ◽  
Monetary Policy ◽  
Interest Rate ◽  
Economic Activity ◽  
Methodological Framework ◽  
Mathematical Methods ◽  
Content Type ◽  
Return Rates ◽  
The Interest Rate ◽  
The Impact

Purpose This paper aims to contribute to formulating the methodological framework for a paradigm of Islamic economics, using the development of the conventional economics, theoretical and mathematical methods. Design/methodology/approach The study based on the inductive and mathematical methods to contribute to economic theory within the methodological framework for Islamic Economics, by using the return rate of Musharakah rather than the interest rate in influence the economic activity and monetary policy. Findings Via replacement, the concept of the interest rate by the return rates of Musharakah. It concludes that the central bank can control the monetary policy, economic activity and the efficient allocation of resources by using the return rates of Musharakah through the framework of Islamic economy. Practical/implications The study is a contribution to formulate the methodological framework for a paradigm of Islamic economics, where it investigates the impact of return rates of Musharakah on the money market and monetary policy, by the mathematical methods used in the conventional economy. Also, the study illustrates the importance of further studies that examine the methodological framework for Islamic Economics. Originality/value The study aims to contribute to formulating the Islamic economic theory, through the return rate of Musharakah financing instead of the interest rate, and its effectiveness of the monetary policy. As well as reformulating the concepts of the investment function, the present value and the marginal efficiency rate of investment according to the Islamic economy approach.

A Study on impact of smartphone addiction on academic performance

2018 ◽  
Vol 7 (2.6) ◽  
pp. 50 ◽  
Author(s):  
Pamela Chaudhury ◽  
Hrudaya Kumar Tripathy
Keyword(s):  
Academic Performance ◽  
Negative Impact ◽  
Pearson Correlation ◽  
Machine Learning Techniques ◽  
Smartphone Addiction ◽  
Active Involvement ◽  
Outdoor Sports ◽  
Using Data ◽  
The Masses ◽  
The Impact

Smartphone addiction is increasingly affecting the masses and is negatively impacting the younger generation. Several researches have been done to study the impact of internet and smartphone addiction. However no work has been done to predetermine academic performance from smartphone addiction using data mining techniques. A total of 222 University students participated in the questionnaire. The survey questionnaire consisted of demographic information, internet access pattern and smartphone addiction pattern. Data was analysed using machine learning techniques using classification models. The results further encouraged us to find the correlation between smartphone addiction and academic performance. Pearson’ correlation was used to establish that smartphone usage had a negative impact on academic performance. Additionally other attributes like internet connectivity and active involvement in outdoor sports activities were investigated. Experimental results confirmed a negative correlation of these attributes with academic performance. The findings were of immense use and could be used to reduce the internet addiction amongst the student community and also enhance their academic performance

scholarly journals The Impact of Public Debt on the Economic Growth of Jordan: An Empirical Study (2000- 2015)

2017 ◽  
Vol 6 (2) ◽  
pp. 114 ◽  
Author(s):  
Tawfiq Ahmad Mousa ◽  
Abudallah. M. LShawareh
Keyword(s):  
Economic Growth ◽  
Empirical Study ◽  
Regression Model ◽  
Least Squares ◽  
Public Debt ◽  
Least Squares Method ◽  
Negative Impact ◽  
External Debt ◽  
Using Data ◽  
The Impact

In the last two decades, Jordan’s economy has been relied on public debt in order to enhance the economic growth. As such, an understanding  of the dynamics between public debt and economic growth is very important in addressing the obstacles to economic growth. The study investigates the impact of public debt on economic growth using data from 2000 to 2015. The study employs least squares method and regression model to capture the impact of public debt on economic growth. The results of the analysis indicate that there is a negative impact of total public debt, especially the external debt on economic growth. 

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