Consumption growth, the interest rate, and financial sophistication

2016 ◽  
Vol 16 (3) ◽  
pp. 348-370
Author(s):  
TULLIO JAPPELLI ◽  
MARIO PADULA
Keyword(s):  
Panel Data ◽  
Interest Rate ◽  
Euler Equation ◽  
Household Income ◽  
Elasticity Of Substitution ◽  
Consumption Growth ◽  
Portfolio Returns ◽  
Italian Survey ◽  
The Interest Rate

AbstractWe propose a model in which financial sophistication improves portfolio returns and therefore the incentive to substitute consumption intertemporally. The model delivers an Euler equation in which consumption growth is positively correlated with financial sophistication. We test the model's prediction using panel data on consumption and financial sophistication drawn from the Italian Survey of Household Income and Wealth. We find that consumption growth is positively correlated with financial sophistication, as predicted by the model. We also provide estimates of the intertemporal elasticity of substitution in the range between 0.4 and 0.6.

scholarly journals FINANCIAL DEEPENING AND INTEREST RATE RELATIONSHIP IN FACING THE ASEAN ECONOMIC COMMUNITY 2015: VECM AND PANEL DATA APPROACH

2020 ◽  
Vol 5 (2) ◽  
Author(s):  
Lukman Hakim
Keyword(s):  
Panel Data ◽  
Interest Rate ◽  
Interest Rates ◽  
Negative Impact ◽  
The Philippines ◽  
Financial Deepening ◽  
Economic Community ◽  
Deposit Rate ◽  
Asean Economic Community ◽  
The Interest Rate

The relationship of the financial deepening to the interest rate has become an important study for the Southeast Asia countries, especially preparation forentering the ASEAN Economic Community (AEC) in 2015. This study will explore the effect of interest rates on deposits and credit to the financial deepening in ASEAN 5. By using VECM showed that Indonesia, the Philippines and Singapore possessed a similar pattern where lending rates negatively affect financial deepening, while the deposit rate positive effect. In contrast to Malaysia and Thailand, deposit rates had a negative impact on financial depth, while the loan interest rate was positive. Meanwhile, using panel data for the ASEAN 5 showed that the effect of interest rates on loans to the depth of the financial sector is negative, whereas the effect of deposit rate was positive

“Corruption premium” on municipal borrowing cost: the case of Spanish Mayors

2019 ◽  
Vol 31 (3) ◽  
pp. 392-409 ◽  
Author(s):  
Francisco Bastida ◽  
María-Dolores Guillamón ◽  
Bernardino Benito ◽  
Ana-María Ríos
Keyword(s):  
Panel Data ◽  
Interest Rate ◽  
Interest Rates ◽  
Financial Management ◽  
Generalized Method Of Moments ◽  
Significant Risk ◽  
Legal Framework ◽  
Content Type ◽  
The Interest Rate ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of mayors’ corruption on the municipal interest rate set by lenders. Design/methodology/approach The sample consists of a panel data for all the Spanish cities with population over 50,000 for 2002–2013 (130 municipalities). In line with previous literature and the structure of the panel data, the authors use a generalized method of moments equation to the main model and three robustness checks. Findings The results, robust to different specifications, indicate that banks do not take mayors’ corruption as a significant risk component of the municipal solvency. The data show a “corruption premium” ranging from −1 to 33 basis points, which aligns with the size of the “corruption premium” found by the literature, but the significance is low. This finding is connected, on the one hand, with the rigid, thorough Spanish legal framework ruling municipal financial management, and on the other hand, with the characteristics of mayors’ corruption. Robust evidence shows that key financial indicators influence interest rates: current saving, with a strong influence, and level of indebtedness, to a lesser extent. Besides, more populated cities pay lower interest rates. Research limitations/implications The main limitation stems from the calculation of interest rate, because but sharp debt changes may decrease the accuracy. Practical implications The data prove that banks value this surplus as a sign of solvency and set lower interest rates. Considering that this financial indicator is key for setting the interest rate, as a point for practitioners, current saving should be monitored by the municipal financial officer, as a way to reduce the financial cost. Besides, legislation should consider current saving as a benchmark to set balanced budget rules or to establish conditions for municipalities to get into greater indebtedness. Originality/value This is the first research on municipal interest rate premium due to corruption in Spain.

scholarly journals An Investigation into the Interest Elasticity of Demand for Money in Developing Countries: A Panel Data Approach

2017 ◽  
Vol 9 (3) ◽  
pp. 69 ◽  
Author(s):  
Felix S. Nyumuah
Keyword(s):  
Developing Countries ◽  
Panel Data ◽  
Interest Rate ◽  
Equatorial Guinea ◽  
African Countries ◽  
Demand For Money ◽  
Elasticity Of Demand ◽  
Long Run ◽  
Short Run ◽  
The Interest Rate

The issue as to whether the interest rate influences the demand for money in developing countries is still controversial. The aim of this study is to attempt to resolve this controversy. The study uses panel data from eight African countries to look at the interest elasticity of demand for money in developing countries. The countries used in the study are Angola (ANG), Equatorial Guinea (EQG), Gambia (GMB), Guinea-Bissau (GBS), Kenya (KNY), Mali (MLI), Nigeria (NGR) and Uganda (UGD). Overall, the study finds the interest rate to be inelastic in the short run but elastic in the long run. This finding suggests that monetary policy is ineffective in developing countries in the long run.

Consumption Growth, the Interest Rate and Aggregation

1993 ◽  
Vol 60 (3) ◽  
pp. 631 ◽  
Author(s):  
Orazio P. Attanasio ◽  
Guglielmo Weber
Keyword(s):  
Interest Rate ◽  
Consumption Growth ◽  
The Interest Rate

scholarly journals DETERMINANTES DEL AUMENTO O DISMINUCIÓN DE EMPRESAS: ANÁLISIS POR ENTIDAD FEDERATIVA Y ESTRATO DE EDAD

2018 ◽  
Vol 37 (1) ◽  
Author(s):  
Rolando I. Valdez ◽  
Eder J. Noda-Ramírez
Keyword(s):  
Panel Data ◽  
Interest Rate ◽  
Gdp Per Capita ◽  
Panel Data Models ◽  
Ceteris Paribus ◽  
Explanatory Variables ◽  
Social Insecurity ◽  
Per Capita ◽  
The Interest Rate ◽  
Number Of Firms

En este trabajo, se pone a prueba la hipótesis de que los mismos factores afectan de manera distinta el aumento o disminución de empresas, según su edad. Para ello, se usan dos modelos de datos panel, cuya variable dependiente es el estrato de edad de la empresa: recién nacida, joven, adulta y mayor. En total, se estiman ocho ecuaciones utilizando variables explicativas de tipo económico y social. Entre los resultados más importantes destaca que el PIB, PIB per cápita, la TIIE, la Tasa de interés bancaria y la liquidez de la economía ejercen el mismo efecto, ceteris paribus, sobre la cantidad de empresas, independientemente de su edad. No obstante, la migración y la inseguridad afectan solo a las empresas recién nacidas y a las jóvenes. Abstract In this present study, the hypothesis that is tested is that the same factors diversely affect the ups and downs in the number of firms, taking into consideration their age. To prove this, there are two specific panel data models, whose dependent variable is the firm’s age stratum: infant, young, adult and elderly. Overall, eight equations are estimated, taking into account economic and social explanatory variables as well. The main results highlight that gdp, gdp per cápita, the interest rate, the banking interest rate and economic liquidity equally impact, ceteris paribus, the number of firms, independent to their age. However, migration and social insecurity impact only infant firms as well as young firms.

scholarly journals The Cross Section of Foreign Currency Risk Premia and Consumption Growth Risk

2007 ◽  
Vol 97 (1) ◽  
pp. 89-117 ◽  
Author(s):  
Hanno Lustig ◽  
Adrien Verdelhan
Keyword(s):  
Interest Rate ◽  
Cross Section ◽  
Foreign Currency ◽  
Risk Premia ◽  
Excess Returns ◽  
Consumption Growth ◽  
High Interest Rate ◽  
Aggregate Consumption ◽  
High Interest ◽  
The Interest Rate

Aggregate consumption growth risk explains why low interest rate currencies do not appreciate as much as the interest rate differential and why high interest rate currencies do not depreciate as much as the interest rate differential. Domestic investors earn negative excess returns on low interest rate currency portfolios and positive excess returns on high interest rate currency portfolios. Because high interest rate currencies depreciate on average when domestic consumption growth is low and low interest rate currencies appreciate under the same conditions, low interest rate currencies provide domestic investors with a hedge against domestic aggregate consumption growth risk. (JEL E21, E43, F31, G11)

The Role of Different Channels in Transmitting Monetary Policy into Output and Price in Vietnam

2015 ◽  
pp. 20-40
Author(s):  
Vinh Nguyen Thi Thuy
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Money Supply ◽  
Monetary Transmission ◽  
Impulse Response Functions ◽  
Short Run ◽  
The Exchange Rate ◽  
The Interest Rate ◽  
Interest Rate Channel

The paper investigates the mechanism of monetary transmission in Vietnam through different channels - namely the interest rate channel, the exchange rate channel, the asset channel and the credit channel for the period January 1995 - October 2009. This study applies VAR analysis to evaluate the monetary transmission mechanisms to output and price level. To compare the relative importance of different channels for transmitting monetary policy, the paper estimates the impulse response functions and variance decompositions of variables. The empirical results show that the changes in money supply have a significant impact on output rather than price in the short run. The impacts of money supply on price and output are stronger through the exchange rate and credit channels, but however, are weaker through the interest rate channel. The impacts of monetary policy on output and inflation may be erroneous through the equity price channel because of the lack of an established and well-functioning stock market.

DETERMINAN INFLASI DI INDONESIA PERIODE 1980-2015

2016 ◽  
Vol 21 (1) ◽  
pp. 1-7
Author(s):  
Risna Risna
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Money Supply ◽  
Government Spending ◽  
Positive Impact ◽  
Secondary Data ◽  
Quantitative Approach ◽  
State Spending ◽  
Factors Affecting ◽  
The Interest Rate

This study aims to determine the effect of government spending, the money supply, the interest rate of Bank Indonesia against inflation.This study uses secondary data. Secondary data were obtained directly from the Central Bureau of Statistics and Bank Indonesia. It can be said that there are factors affecting inflationas government spending, money supply, and interest rates BI. The reseach uses a quantitative approach to methods of e-views in the data. The results of analysis of three variables show that state spending significantand positive impact on inflationin Indonesia, the money supply significantand negative to inflationin Indonesia, BI rate a significantand positive impact on inflation in Indonesia

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