The impacts of interest rate changes on US Midwest farmland values

PurposeThis paper quantifies the effects of recent Federal Reserve interest rate changes, specifically recent hikes and cuts in the federal funds rate since 2015, on Midwest farmland values.Design/methodology/approachThe authors apply three autoregressive distributed lag (ARDL) models to a panel data of state-level farmland values from 1963 to 2018 to estimate the dynamic effects of interest rate changes on the US farmland market. We focus on the I-states, Lakes states and Great Plains states. The models in the study capture both short-term and long-term impacts of policy changes on land values.FindingsThe authors find that changes in the federal funds rate have long-lasting impacts on farmland values, as it takes at least a decade for the full effects of an interest rate change to be capitalized in farmland values. The results show that the three recent federal funds rate cuts in 2019 were not sufficient to offset the downward pressures from the 2015–2018 interest rate hikes, but the 2020 cut is. The combined effect of the Federal Reserve's recent interest rate moves on farmland values will be positive for some time starting in 2022.Originality/valueThis paper provides the first empirical quantification of the immediate and long-run impacts of recent Federal Reserve interest rate moves on farmland values. The authors demonstrate the long-lasting repercussions of Federal Reserve's policy choices in the farmland market.

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Outside the Box: Unconventional Monetary Policy in the Great Recession and Beyond

The Journal of Economic Perspectives ◽

10.1257/jep.32.4.121 ◽

2018 ◽

Vol 32 (4) ◽

pp. 121-146 ◽

Cited By ~ 28

Author(s):

Kenneth N. Kuttner

Keyword(s):

Interest Rate ◽

Federal Reserve ◽

Balance Sheet ◽

Federal Funds ◽

Federal Funds Rate ◽

Monetary Policies ◽

The Great Recession ◽

Mortgage Backed Securities ◽

Policy Statements ◽

Government Sponsored Enterprises

In November 2008, the Federal Reserve faced a deteriorating economy and a financial crisis. The federal funds rate had already been reduced to virtually zero. Thus, the Federal Reserve turned to unconventional monetary policies. Through “quantitative easing,” the Fed announced plans to buy mortgage-backed securities and debt issued by government-sponsored enterprises. Subsequent purchases would eventually lead to a five-fold expansion in the Fed’s balance sheet, from $900 billion to $4.5 trillion, and leave the Fed holding over 20 percent of all mortgage-backed securities and marketable Treasury debt. In addition, Fed policy statements in December 2008 began to include explicit references to the likely path of the federal funds interest rate, a policy that came to be known as “forward guidance.” The Fed ceased its direct asset purchases in late 2014. Starting in October 2017, it has allowed the balance sheet to shrink gradually as existing assets mature. From December 2015 through June 2018, the Fed has raised the federal funds interest rate seven times. Thus, the time is ripe to step back and ask whether the Fed’s unconventional policies had the intended expansionary effects—and by extension, whether the Fed should use them in the future.

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Should the U.S. Federal Reserve increase the federal funds rate in 2016? An assessment based on the neutral interest rate

Investigación Económica ◽

10.1016/j.inveco.2016.07.002 ◽

2016 ◽

Vol 75 (296) ◽

pp. 5-42 ◽

Cited By ~ 2

Author(s):

Armando Sánchez Vargas

Keyword(s):

Interest Rate ◽

Federal Reserve ◽

Federal Funds ◽

Federal Funds Rate ◽

The U.S

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Changes In The Regional Responsiveness To Federal Reserve Policy Shocks And The Declining Importance Of Interest Rate Sensitive Industry Sectors

Journal of Business & Economics Research (JBER) ◽

10.19030/jber.v4i12.2725 ◽

2011 ◽

Vol 4 (12) ◽

Author(s):

Todd Potts ◽

David Yerger

Keyword(s):

Interest Rate ◽

Federal Reserve ◽

Oil Price ◽

Oil Price Shocks ◽

Sample Period ◽

Font Size ◽

Price Shocks ◽

Federal Funds ◽

Federal Funds Rate ◽

Policy Shocks

This paper extends the existing research on regional economic responses to federal-reserve policy shocks along two dimensions.  First, we focus on the evolution over time of a particular region’s responsiveness to federal funds shocks.  This differs from prior work that analyzed differences across regions in their responsiveness to a federal funds shock over a single sample period.  For the state of Delaware, we track how the declining importance of manufacturing and construction alters the region’s income response to both federal funds rate and oil price shocks.  Delaware was selected for analysis because of the large decline since the 1970’s in the share of its Gross State Product coming from construction and manufacturing. This paper’s second extension of the literature is its use of sequential updating of the data set.  Prior research utilized quarterly data sets starting in the late 1950’s and ending in the early 1990’s.  We construct a parsimonious structural VAR model and first estimate the model over the 1958Q1 to 1992 Q4 period. Over this period our results are consistent with earlier findings.  Next, we roll the sample period forward one year at a time, keeping the time period’s length constant, up through 2004 Q2 and re-estimate the model after each resetting of the sample period.  Overall, our findings are consistent with the view that declines in the importance of interest rate sensitive sectors will lead to declines in the responsiveness of a region’s income growth to federal funds rate shocks, but the magnitude of the observed decline in income sensitivity is considerably smaller than what one would forecast based upon the earlier cross-sectional based research.  The impact of oil price shocks, however, was contrary to ‘conventional wisdom’ expectations.  Despite the declining share of manufacturing in GSP for Delaware over the rolling sample periods, there was a modest increase in the sensitivity of Delaware real personal income to oil price shocks as the sample period rolled forward.

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A mixture autoregressive model based on Gaussian and Student’s t-distributions

Studies in Nonlinear Dynamics & Econometrics ◽

10.1515/snde-2020-0060 ◽

2021 ◽

Vol 0 (0) ◽

Author(s):

Savi Virolainen

Keyword(s):

Interest Rate ◽

Autoregressive Model ◽

Autoregressive Models ◽

Federal Funds ◽

Treasury Bill ◽

Federal Funds Rate ◽

Empirical Application ◽

Model Based ◽

Interest Rate Spread ◽

Student’S T

Abstract We introduce a new mixture autoregressive model which combines Gaussian and Student’s t mixture components. The model has very attractive properties analogous to the Gaussian and Student’s t mixture autoregressive models, but it is more flexible as it enables to model series which consist of both conditionally homoscedastic Gaussian regimes and conditionally heteroscedastic Student’s t regimes. The usefulness of our model is demonstrated in an empirical application to the monthly U.S. interest rate spread between the 3-month Treasury bill rate and the effective federal funds rate.

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Macroeconomic determinants of interest rate spreads in Ghana

African Journal of Economic and Management Studies ◽

10.1108/ajems-12-2015-0143 ◽

2017 ◽

Vol 8 (1) ◽

pp. 76-88 ◽

Cited By ~ 26

Author(s):

Samuel Kwabena Obeng ◽

Daniel Sakyi

Keyword(s):

Interest Rate ◽

Exchange Rate Volatility ◽

Institutional Quality ◽

Fiscal Discipline ◽

Content Type ◽

Distributed Lag ◽

Short Run ◽

Interest Rate Spreads ◽

Macroeconomic Determinants ◽

The Impact

Purpose The purpose of this paper is to examine macroeconomic determinants of interest rate spreads in Ghana for the period 1980-2013. Design/methodology/approach The autoregressive distributed lag bounds test approach to cointegration and the error correction model were used for the estimation. Findings The results indicate that exchange rate volatility, fiscal deficit, economic growth, and public sector borrowing from commercial banks, increase interest rate spreads in Ghana in both the long and short run. Institutional quality reduces interest rate spreads in the long run while lending interest rate volatility and monetary policy rate reduce interest rate spreads in the short run. Research limitations/implications The depreciation of the Ghana cedi must be controlled since its volatility increases spreads. There is a need for fiscal discipline since fiscal deficits increase interest rate spreads. Government must reduce its domestic borrowing because the associated crowding-out effect increases interest rate spreads. The central bank must improve its monitoring and regulation of the financial sector in order to reduce spreads. Originality/value The main novelty of the paper (compared to other studies on Ghana) lies on the one hand; analysing macroeconomic determinants of interest rate spreads and, on the other hand, controlling for the impact of institutional quality on interest rate spreads in Ghana.

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VARIABEL-VARIABEL PENGGERAK INDEKS HARGA SAHAM SEKTOR PERTANIAN

Seminar Nasional Official Statistics ◽

10.34123/semnasoffstat.v2019i1.64 ◽

2020 ◽

Vol 2019 (1) ◽

pp. 720-725

Author(s):

Muhammad Febrian Rizky Ramadhan ◽

Gama Putra Danu Sohibien

Keyword(s):

Federal Funds ◽

Federal Funds Rate ◽

Distributed Lag ◽

Autoregressive Distributed Lag

Indeks harga saham sektor pertanian di Indonesia cenderung menurun dari tahun 2009 – 2018 dengan rata-rata pertumbuhan sebesar -0,76 persen per tahun. Apabila tidak terjadi pemulihan harga, penurunan yang terjadi berpotensi menimbulkan sentimen buruk terhadap sektor pertanian dan menurunkan aliran modal masuk terhadap perusahaan-perusahaan yang tercakup dalam sektor tersebut. Dalam upaya memecahkan permasalahan tersebut, dilakukan identifikasi variabel-variabel yang mempengaruhi harga saham sektor pertanian. Adapun variabel yang diduga memiliki pengaruh terhadap harga saham sektor tersebut, yakni nilai tukar rupiah terhadap dolar Amerika Serikat, federal funds rate, harga minyak kelapa sawit, dan volume transaksi saham sektor pertanian. Dengan pemodelan Autoregressive Distributed-lag disimpulkan bahwa, keempat variabel tersebut memiliki pengaruh yang signifikan terhadap indeks harga saham sektor pertanian. Federal Funds Rate dan nilai tukar rupiah memiliki pengaruh negatif terhadap indeks harga saham sektor pertanian, sedangkan variabel lainnya memiliki pengaruh positif. Hasil penelitian ini diharapkan mampu memberikan informasi ke penggiat saham dan pemerintah, agar tidak terjadi kerugian yang besar di periode-periode selanjutnya.

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Stock prices, exchange rate and interest rate: evidence beyond symmetry

Journal of Financial Economic Policy ◽

10.1108/jfep-01-2016-0007 ◽

2017 ◽

Vol 9 (1) ◽

pp. 2-19 ◽

Cited By ~ 12

Author(s):

Taufeeq Ajaz ◽

Md Zulquar Nain ◽

Bandi Kamaiah ◽

Naresh Kumar Sharma

Keyword(s):

Exchange Rate ◽

Interest Rate ◽

Stock Prices ◽

Asset Price ◽

Asymmetric Reaction ◽

Monetary Policies ◽

Content Type ◽

Financial Variables ◽

Distributed Lag ◽

Indian Context

Purpose This paper aims to examine the dynamic interactions between monetary and financial variables in the Indian context. Design/methodology/approach In this paper, the authors have applied a recently developed asymmetric autoregressive distributed lag (ARDL) model by Shin et al. (2014), for detecting nonlinearities focusing on the long-run and short-run asymmetries among economic variables. Findings The results point toward the presence of asymmetric reaction of stock prices to changes in interest rate and exchange rate in full sample, as well as in pre-crisis. However, no asymmetry was found in the post-crisis period. The results further suggest that tight monetary policies appear to retard the stock prices, more than easy monetary policies that stimulate them. Practical implications The findings of the study can be helpful in understanding the policy transmission mechanism through asset price channel. Originality/value To the best of the authors’ knowledge, this is the first study that examines the interactions between monetary and financial variables in the Indian context in an asymmetric framework. The findings of this study are quite interesting and are different from several existing studies in the literature.

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The Potential Increase in Corporate Debt Interest Rate Payments from Changes in the Federal Funds Rate

FEDS Notes ◽

10.17016/2380-7172.2076 ◽

2017 ◽

Vol 2017 (2076) ◽

Cited By ~ 1

Author(s):

Ashish Kumbhat ◽

◽

Francisco Palomino ◽

Ander Perez-Orive ◽

◽

...

Keyword(s):

Interest Rate ◽

Corporate Debt ◽

Federal Funds ◽

Federal Funds Rate ◽

Potential Increase

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US Fed will struggle to raise rates much in 2016

Emerald Expert Briefings ◽

10.1108/oxan-db207660 ◽

2016 ◽

Keyword(s):

Interest Rates ◽

Investor Sentiment ◽

Commodity Prices ◽

Federal Funds ◽

Federal Funds Rate ◽

Content Type ◽

The Us ◽

The Face ◽

Lift Off ◽

China’S Economy

Subject US monetary policy outlook for 2016 and its global impact. Significance There is a large discrepancy between the US Federal Reserve (Fed)'s estimates for interest rates at end-2016 and the expectations of bond investors. The latter are anticipating less tightening than the 100-basis-point (bp) rise in the Federal Funds rate the Fed has pencilled in for this year. Despite a successful rates 'lift-off' on December 16, the Fed faces many challenges in raising rates in the face of mounting stress in credit markets, disinflationary pressures from the plunge in commodity prices and a contraction manufacturing. Impacts While the Fed will tighten policy, other central banks, including the ECB, will provide further stimulus, accentuating policy divergence. Investors will price in a more hawkish Fed if US inflation accelerates faster than expected, potentially leading to a sell-off. Concerns about China's economy and the commodity prices slump will also shape investor sentiment.

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Further Mexico rate hikes likely in 2018

Emerald Expert Briefings ◽

10.1108/oxan-db227635 ◽

2017 ◽

Keyword(s):

Monetary Policy ◽

Interest Rate ◽

Interest Rates ◽

Federal Reserve ◽

Content Type ◽

The Us ◽

Wage Increases

Subject Monetary policy moves. Significance The Bank of Mexico (Banxico) increased its target interest rate by 25 basis points, to 7.25%, on December 14, responding to a similar move by the US Federal Reserve (Fed) the previous day. The hike was the first to be taken under new Governor Alejandro Diaz de Leon and pushes the rate to its highest level since March 2009. Impacts Tighter monetary policy will weigh on growth in 2018 and may hit the PRI’s electoral prospects. More expensive credit will hit consumption moderately, as interest rates remain relatively low by historical standards. The possibility of wage increases edging up will feed inflationary expectations.

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