Growths in US housing starts, real consumer debt, real GDP and the long-term real interest rate: a vector cointegration analysis

1997 ◽  
Vol 4 (12) ◽  
pp. 757-759 ◽  
Author(s):  
Matiur Rahman ◽  
Muhammad Mustafa
Keyword(s):  
Interest Rate ◽  
Real Interest Rate ◽  
Cointegration Analysis ◽  
Consumer Debt ◽  
Real Gdp ◽  
Housing Starts

Impacts of Real Depreciation and Appreciation on Aggregate Output in Taiwan

2018 ◽  
Vol 65 (1) ◽  
pp. 123-130
Author(s):  
Yu Hsing
Keyword(s):  
Interest Rate ◽  
Gross Domestic Product ◽  
Stock Price ◽  
Real Interest Rate ◽  
Jel Classification ◽  
Oil Price ◽  
Real Gross Domestic Product ◽  
Real Gdp ◽  
Expected Inflation ◽  
Deficit Spending

Extending the IS-MP-AS model, this article finds that real depreciation helped to raise real gross domestic product (GDP) during 1999.Q1-2010.Q2 whereas real appreciation helped to increase real GDP during 2010.Q3-2016.Q4. In addition, a lower world real interest rate, a higher stock price, a higher real oil price or a lower expected inflation would increase real GDP. More deficit spending as a percent of GDP does not affect real GDP.JEL Classification: F41, E62

The Long Slump

2011 ◽  
Vol 101 (2) ◽  
pp. 431-469 ◽  
Author(s):  
Robert E Hall
Keyword(s):  
Interest Rate ◽  
Real Interest Rate ◽  
Inflation Rate ◽  
Full Employment ◽  
Consumer Debt ◽  
Real Rate ◽  
Consumer Durables ◽  
The Great Depression ◽  
Real Estate Prices ◽  
The Interest Rate

In a market-clearing economy, declines in demand from one sector do not cause large declines in aggregate output because other sectors expand. The key price mediating the response is the interest rate. A decline in the rate stimulates all categories of spending. But in a low-inflation economy, the room for a decline in the rate is small, because of the notorious lower limit of zero on the nominal interest rate. In the Great Depression, substantial deflation caused the real interest rate to reach high levels. In the Great Slump that began at the end of 2007, low inflation resulted in an only slightly negative real rate when full employment called for a much lower real rate because of declines in demand. Fortunately, the inflation rate hardly responded to conditions in product and labor markets, else deflation might have occurred, with an even higher real interest rate. I concentrate on three closely related sources of declines in demand: the buildup of excess stocks of housing and consumer durables, the corresponding expansion of consumer debt that financed the buildup, and financial frictions that resulted from the decline in real-estate prices. (JEL E23, E24, E31, E32, E65)

scholarly journals Credit Cycles: Econometric Analysis and Evidence for Russia

2014 ◽  
pp. 113-122
Author(s):  
N. V. Artamonov ◽  
D. V. Artamonov ◽  
V. A. Artamonov
Keyword(s):  
Time Series ◽  
Interest Rate ◽  
Interest Rates ◽  
Russian Federation ◽  
Statistical Data ◽  
Econometric Analysis ◽  
Short Term ◽  
Credit Cycles ◽  
Real Gdp

One of the principal problem in contemporary macroeconomics is concerned with factors increasing or decreasing economic dynamics. The mainstream approach is based on neoclassical assumptions, but recently new approaches appear mostly based on new Keynesian concepts. In present time the influence of monetary market and credit instruments become more and more significant. Credit resources of banking and financial structures can affect and distort to reallocation of resources for national and even for global economic. In present paper an empiric and econometric analysis for some macroeconometric and monetary indices for Russian Federation is done. An econometrical models describing the influence of credit variables onto real GDP is estimated. It is shown that in short-term periods changes in credit variables do influence significantly onto GDP. It is shown that on short-term periods changes in money aggregate M2 brings influence (through credit variables) onto national output. As well it is shown that changes in short-term interest rate brings significant negative influence onto real output. Impulse response functions for GDP on shocks of credit variables, monetary base and short-term interest rate are evaluated. For the present study of credit cycles and their impact to real business cycles statistical data (quarterly time series) on the following factors for Russian Federation are collected: nominal and real GDP, monetary base M2, short-term interest rate, long-term interest rate (10-year treasuries bill rate), total debt outstanding. All time series are seasonally adjusted and collected for the period 2004 Q1 - 2013 Q2. All interest rates are adjusted for inflation (i.e. we deal with real interest rates). The investigation of long-term relationship for the factors under consideration are based on integration. It is important to note that in the present paper all econometric models are estimated on "pure" statistical data, while in many research papers on business and credit cycles all evaluations and inferences are based on "filtered" time series (mostly filtered by Hodrick-Prescott's method). In present paper "causality" always means "Granger causality". All estimations are made in gretl, an open-source multiplatform econometric software.

scholarly journals Estimation of Consumption Function for Developing Economies: China, Turkey, Vietnam and Bangladesh

2020 ◽  
Vol V (I) ◽  
pp. 1-11
Author(s):  
Saima Liaqat ◽  
Marguerite Wotto ◽  
Khalid Khan
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Real Interest Rate ◽  
Time Series Data ◽  
Developing Economies ◽  
Series Data ◽  
Consumption Function ◽  
Middle Income ◽  
Aggregate Consumption ◽  
Real Gdp

This study analyses the determinants of consumption function for four countries: China and Turkey as Upper Middle-Income Economies (UMIE); Bangladesh and Vietnam as Lower Middle-Income Economies (LMIE). It used a model based on the ARDL technique to analyze the time series data for the period of 1985- 2018. The results reveal that wealth and labor income have a similar impact on consumption in UMIE and LMIE since they affect significantly and positively aggregate consumption. Unemployment and real interest rates have an analogous result for UMIE while assorted results LMIE. The real interest rate harms RPAC as evidence of income effect. However, the short-term wealth and real GDP positively affect real RPAC whereas the unemployment rate and real interest rate negatively affect aggregate real private consumption of the selected economies.

The long-run interrelationship between exchange rate and interest rate: the case of Mexico

2019 ◽  
Vol 46 (7) ◽  
pp. 1380-1397 ◽  
Author(s):  
Salvatore Capasso ◽  
Oreste Napolitano ◽  
Ana Laura Viveros Jiménez
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Real Exchange Rate ◽  
Real Interest Rate ◽  
Content Type ◽  
Long Run ◽  
Monetary Authorities ◽  
The Exchange Rate ◽  
The Interest Rate

Purpose The purpose of this paper is to analyse the long-term nature of the interrelationship between interest rate and exchange rate. Design/methodology/approach By employing Mexican data, the authors estimate a non-linear autoregressive distributed lags (NARDL) model to investigate the nature of the changes and the interaction between interest rate and exchange rate in response to monetary authorities’ actions. Findings The results show that, contrary to simplistic predictions, the real exchange rate causes the real interest rate in an asymmetric way. The bounds testing approach of the NARDL models suggests the presence of co-integration among the variables and the exchange rate variations appear to have significant long-run effects on the interest rate. Most importantly, these effects are asymmetric and positive variations in the exchange rate have a lower impact on the interest rate. It is also interesting to report that the reverse is not true: the interest rate in the long-run exerts no statistical significant impact on the exchange rate. Practical implications The asymmetric long-term relationship between real exchange rate and real interest rate is evidence of why monetary authorities are reluctant to free float exchange rate. In Mexico, as in most developing countries, monetary policy strongly responds to exchange rate movements because these have relevant effects on commercial trade. Moreover, in dollarized economies these effects are stronger because of pass-through impacts to inflation, income distribution and balance-sheet equilibrium (the well-known “original sin”). Originality/value Under inflation targeting and flexible exchange rate regime, despite central banks pursue the control of short-term interest rate, in the long-run one could observe that it is the exchange rate that influences the interest rate, and that this reverse causality is stronger in emerging economies. This paper contributes by analysing the asymmetric relationship between the variables.

Financial market determinants of the real cost of funds to public corporations in the US

2016 ◽  
Vol 8 (1) ◽  
pp. 2-12 ◽  
Author(s):  
Richard J. Cebula ◽  
Fabrizio Rossi ◽  
Fiorentina Dajci ◽  
Maggie Foley
Keyword(s):  
Interest Rate ◽  
Real Interest Rate ◽  
Budget Deficit ◽  
Corporate Bonds ◽  
Capital Inflows ◽  
Monetary Base ◽  
Content Type ◽  
Ex Post ◽  
The Usa

Purpose The purpose of this study is to provide new empirical evidence on the impact of a variety of financial market forces on the ex post real cost of funds to corporations, namely, the ex post real interest rate yield on AAA-rated long-term corporate bonds in the USA. The study is couched within an open-economy loanable funds model, and it adopts annual data for the period 1973-2013, so that the results are current while being applicable only for the post-Bretton Woods era. The auto-regressive two-stage least squares (2SLS) and generalized method of moments (GMM) estimations reveal that the ex post real interest rate yield on AAA-rated long-term corporate bonds in the USA was an increasing function of the ex post real interest rate yields on six-month Treasury bills, seven-year Treasury notes, high-grade municipal bonds and the Moody’s BAA-rated corporate bonds, while being a decreasing function of the monetary base as a per cent of gross domestic product (GDP) and net financial capital inflows as a per cent of GDP. Finally, additional estimates reveal that the higher the budget deficit as a per cent of GDP, the higher the ex post real interest rate on AAA-rated long-term corporate bonds. Design/methodology/approach After developing an initial open-economy loanable funds model, the empirical dimension of the study involves auto-regressive, two-stage least squares and GMM estimates. The model is then expanded to include the federal budget deficit, and new AR/2SLS and GMM estimates are provided. Findings The AR/2SLS and GMM (generalized method of moments) estimations reveal that the ex post real interest rate yield on AAA-rated long-term corporate bonds in the USA was an increasing function of the ex post real interest rate yields on six-month Treasury bills, seven-year Treasury notes, high-grade municipal bonds and the Moody’s BAA-rated corporate bonds, while being a decreasing function of the monetary base as a per cent of GDP and net financial capital inflows as a per cent of GDP. Finally, additional estimates reveal that the higher the budget deficit as a per cent of GDP, the higher the ex post real interest rate on AAA-rated long -term corporate bonds. Originality/value The author is unaware of a study that adopts this particular set of real interest rates along with net capital inflows and the monetary base as a per cent of GDP and net capital inflows. Also, the data run through 2013. There have been only studies of deficits and real interest rates in the past few years.

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