Low interest rate environment: inventory management in Finland and Baltic states

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Olli-Pekka Hilmola ◽  
Weidong Li ◽  
Andres Tolli
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Customer Service ◽  
Inventory Management ◽  
Global Financial Crisis ◽  
Recent Decade ◽  
Baltic States ◽  
Content Type ◽  
Low Interest Rates ◽  
Rate Environment

PurposeFor decades, it was emphasized that manufacturing and trading companies should aim to be lean with very small inventories. However, in the recent decade, time-significant change has taken place as nearly all of the “old west” countries have now low interest rates. Holding inventories have been beneficial for the sake of customer service and for achieving savings in transportation and fixed ordering costs.Design/methodology/approachIn this study, inventory management change is examined in publicly traded manufacturing and trade companies of Finland and three Baltic states (Estonia, Latvia and Lithuania) during the years 2010–2018.FindingsInventory efficiency has been leveled off or falling in these countries and mostly declining development has concerned small- and medium-sized enterprises (SMEs). It is also found that inventory efficiency is in general lower in SMEs than in larger companies. Two companies sustaining in inventory efficiency are used as an example that lean has still significance, and higher inventories as well as lower inventory efficiency should not be the objective. Two companies show exemplary financial performance as well as shareholder value creation.Research limitations/implicationsWork concerns only four smaller countries, and this limits its generalization power. Research is one illustration what happens to private sector companies under low interest rate policies.Practical implicationsContinuous improvement of inventory efficiency becomes questionable in the light of current research and the low interest rate environment.Originality/valueThis is one of the seminal studies from inventory efficiency as the global financial crisis taken place in 2008–2009 and there is the implementation of low interest rates.

Rate policy may diverge in Central Europe in near term

2016 ◽  
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Central Europe ◽  
The Czech Republic ◽  
Content Type ◽  
Low Interest Rates ◽  
National Bank ◽  
Rate Policy ◽  
Near Term ◽  
Fx Market

Subject Monetary policy divergence in Central Europe in 2016. Significance At its March meeting, Hungary's National Bank (MNB) cut its benchmark interest rate to a record low of 1.2%, from 1.35%. Hungary's first interest rate cut since July 2015 came days after the ECB announced significant monetary easing measures. Deflationary conditions in much of Central Europe (CE) are heightening the likelihood of more monetary easing. Impacts Whereas Hungary will embark on a monetary easing cycle, the Czech Republic and Poland will hold rates unchanged in the short term. CPI is not expected to return within target before late 2017 or early 2018, necessitating a prolonged period of ultra-low interest rates. The return to monetary normalisation (the CNB is expected to exit the FX market during 2017) will be slow and gradual.

Policy will be key to supporting cashless consumption

2018 ◽  
Keyword(s):  
Interest Rates ◽  
Digital Divide ◽  
Financial Services ◽  
Global Financial Crisis ◽  
Content Type ◽  
Electronic Transactions ◽  
Opt Out ◽  
The World ◽  
Low Interest Rates ◽  
The Global Financial Crisis

Subject Cashless society transformation. Significance Transacting electronically is quicker and cheaper than using cash, provided the infrastructure is in place to support the transactions. Across the world, the number of electronic transactions and the supporting infrastructure has surged over the last two decades. Card payments averaged 25.3% of GDP in 2016 in the 24 countries the Committee for Payments and Markets Infrastructure covers, up from 12.8% in 2000. Despite this, cash retains a key role, paradoxically even more since the global financial crisis, as ultra-low interest rates in the ten post-crisis years reduced the opportunity cost of holding cash. Impacts All cashless transactions are automatically tracked, forcing consumers to sacrifice more privacy without the ability to ‘opt-out’. An individual’s credit standing will gain importance and may become as key to gaining employment as it is to accessing financial services. There will be a digital divide not only in access to and exclusion from financial services but also the ability to pay. Payments for services could become the fastest-growing category of cashless transactions.

Auswirkungen der anhaltenden Niedrigzinsen auf das Versicherungswesen

2015 ◽  
Vol 64 (2) ◽  
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Life Insurance ◽  
Insurance Industry ◽  
Life Insurers ◽  
Life Insurance Industry ◽  
Low Interest Rates ◽  
Rate Environment ◽  
German Life

AbstractHelmut Gründl discusses in his paper the effects of the present low interest rate environment on the German life insurance industry. By referring to a recent study of the “International Center for Insurance Regulation”, he assesses insolvency probabilities for life insurers with different capital endowments under different interest rate scenarios. Based on that, he discusses measures of insurance regulation that try to cope with the imminent problems of the life insurance industry. Finally, he has a look at product developments and investment strategies of life insurers in the presence of low interest rates. Hereby, he argues, that life insurance products with lower investment guarantees that are granted for a shorter period of time are regarded as the best remedy to avoid low interest rate problems in the future. Such product development also allows for a more risky investment policy of life insurers that can make life and annuity products more attractive.Rolf Ketzler und Peter Schwark explicate that the very accommodative monetary policy of the ECB and the related extremely low interest rates are involved with major challenges for the German insurance sector, in particular for life insurers. As long-term investors, insurers are not only affected in their capital investment strategy, but also by different households’ retirement saving patterns in response to the low interest rate environment. Several significant steps have already been taken in order to ensure the long-term viability of life insurance. These include changes in the product portfolio as well as new approaches in the investment strategy. In addition, new regulatory requirements have been established to strengthen the risk bearing capacity of life insurers. Given the substantial risks of low interest rates, from an economic point of view the question concerning an appropriate exit from the low interest rate environment needs more attention in the public debate. They argue that in this context, further progress regarding the economic reform policies in the euro zone is still necessary as a condition for the ECB to normalize its monetary policy as soon as possible.Focusing the perspective of German life insurance industry, the article of Heinrich Schradin starts with a brief description and discussion of the financial impact of the persistently low interest rate environment. Based on an empirical data set of German life insurers, the author illustrates actual limitations to generate sufficient investment income for to meet the given specific financial guarantees. Moreover, the core problem, caused by the use of volatile timing-related interest rates for to evaluate long-term cash flows, becomes obvious. The currently observed regulatory interventions are trying to overcome the existential consequences of the so-called fair value measurement. In consequence, the author derives four central theses:1. Life insurance in Germany suffers from insufficient capital adequacy.2. Persistent low interest rates threaten the fulfillment of financial guaranty commitments of German life insurers.3. The generally accepted principals of economic evaluation do not satisfy to the traditional business model of German life insurers.4. Under a business perspective, the development of new life insurance products is inevitable.

Auswirkungen der anhaltenden Niedrigzinsen auf das Versicherungswesen

2015 ◽  
Vol 64 (2) ◽  
Author(s):  
Rolf Ketzler ◽  
Peter Schwark
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Capital Investment ◽  
Investment Strategy ◽  
Economic Point ◽  
Life Insurers ◽  
Low Interest Rates ◽  
Rate Environment

AbstractThe very accommodative monetary policy of the ECB and the related extremely low interest rates are involved with major challenges for the German insurance sector, in particular for life insurers. As long-term investors, insurers are not only affected in their capital investment strategy, but also by different households’ retirement saving patterns in response to the low interest rate environment. Several significant steps have already been taken in order to ensure the long-term viability of life insurance. These include changes in the product portfolio as well as new approaches in the investment strategy. In addition, new regulatory requirements have been established to strengthen the risk bearing capacity of life insurers. Given the substantial risks of low interest rates, from an economic point of view the question concerning an appropriate exit from the low interest rate environment needs more attention in the public debate. In this context, further progress regarding the economic reform policies in the euro zone is still necessary as a condition for the ECB to normalize its monetary policy as soon as possible.

Structured product investment behavior in low-interest rate environments

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hirotaka Fushiya ◽  
Tomoki Kitamura ◽  
Munenori Nakasato
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Investment Behavior ◽  
Underlying Asset ◽  
Content Type ◽  
Low Interest Rates ◽  
Relative Attractiveness ◽  
Investment Experience ◽  
The Interest Rate ◽  
The Impact

Purpose This study aims to investigate the impact of interest rates, the underlying asset and investment experience on the investment behavior of Japanese retail investors toward structured products (SPs). Design/methodology/approach Three treatments are constructed through internet-based survey experiments: interest rate, underlying asset framing and investment experience treatments. The interest rate treatment includes high- and low-interest rate environments. The underlying asset framing treatment includes equity and foreign exchange rates for the SP. The investment experience treatment includes experienced and inexperienced respondents for SPs. Findings The main finding of this study concerns the effect of the interaction between low-interest rates and investment experience. Specifically, SP-experienced investors tend to choose SPs in a low-interest rate environment and prefer equity-linked SPs, even though such SPs are overpriced. This finding is useful for financial regulators in formulating policies that protect retail SP investors in low-interest rate environments worldwide. Originality/value This study is the first to measure the sensitivities of investment behavior regarding the relative attractiveness of SPs to low-risk straight bonds, given interest rates, the underlying asset and investment experience. It provides evidence to support the development of SP regulations.

Ultra-Low Interest Rates and Growth in Emerging East Asia from a Hayekian Perspective

2019 ◽  
pp. 294-316
Author(s):  
Gunther Schnabl
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
East Asia ◽  
Exchange Rate Regime ◽  
Growth Dynamics ◽  
Capital Allocation ◽  
Industrialized Countries ◽  
Credit Expansion ◽  
Low Interest Rates ◽  
Rate Environment

The chapter explores business cycles and growth dynamics in emerging East Asia within an ultra-low interest rate environment from the perspective of the monetary overinvestment theories of Mises and Hayek. It argues that, given a low interest rate environment in the large industrialized countries, the likelihood of overinvestment and therefore a crisis in emerging East Asia has increased independently from the exchange rate regime. Overinvestment can take the form of unsustainable booms on stock and real estate markets (as in Southeast Asia prior to the Asian crisis) or the misallocation of funds due to subsidized state-directed capital allocation (as is currently occurring in the People’s Republic of China). If further credit expansion counteracts a crisis triggered by a preceding overinvestment boom, it paralyses growth in the long term, as Japan experienced.

Auswirkungen der anhaltenden Niedrigzinsen auf das Versicherungswesen

2015 ◽  
Vol 64 (2) ◽  
Author(s):  
Helmut Gründl
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Life Insurance ◽  
Insurance Industry ◽  
Investment Strategies ◽  
Insurance Regulation ◽  
Life Insurers ◽  
Life Insurance Industry ◽  
Low Interest Rates ◽  
Rate Environment

AbstractThis paper discusses the effects of the present low interest rate environment on the German life insurance industry. By referring to a recent study of the “International Center for Insurance Regulation”, we assess insolvency probabilities for life insurers with different capital endowments under different interest rate scenarios. Based on that, we discuss measures of insurance regulation that try to cope with the imminent problems of the life insurance industry. Finally, we have a look at product developments and investment strategies of life insurers in the presence of low interest rates. Hereby, life insurance products with lower investment guarantees that are granted for a shorter period of time are regarded as the best remedy to avoid low interest rate problems in the future. Such product development also allows for a more risky investment policy of life insurers that can make life and annuity products more attractive.

The causes and challenges of low interest rates: insights from basic principles and recent literature

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Youchang Wu
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Relative Price ◽  
Downward Trend ◽  
Real Interest Rates ◽  
Basic Principles ◽  
Content Type ◽  
Economic Forces ◽  
Rate Environment

PurposeWhat causes the downward trend of real interest rates in major developed economies since the 1980s? What are the challenges of the near-zero interest and inflation rates for monetary policy? What can the policymakers learn from the latest developments in the monetary and interest rate theory? This paper aims to answer these questions by reviewing both basic principles of interest rate determination and recent academic and policy debates.Design/methodology/approachThe paper critically reviews the explanations for the downward trend of real interest rates in recent decades and monetary policy options in a near-zero interest rate environment.FindingsThe decline of real interest rates is likely an outcome of multiple technological, social and economic factors including diminished productivity growth, changing demographics, elevated tail-risk concerns, time-varying convenience yields of safe assets, increased global demand for safe assets, rising wealth and income inequality, falling relative price of capital, accommodative monetary policies, and changes in industry structure that alter the investment and saving behaviors of the corporate sector. The near-zero interest rate limits the space of central banks' response to economic crises. It also challenges some conventional wisdoms of monetary theory and sparks radically new ideas about monetary policy.Originality/valueThis survey differs from the existing work by taking a broader view of both economics and finance literature. It critically assesses the economic forces driving the global decline of real interest rates through the lens of basic principles and empirical evidence and discusses the merits and limitations of each proposed explanation. The study emphasizes the importance of a better understanding of economic forces driving diverging trends of corporate investment and saving behaviors. It also discusses the implications of the neo-Fisherism and the fiscal theory of price level for monetary policy in a low interest rate environment.

Economic effects of monetary policy in Russia: What do large datasets tell us?

2020 ◽  
pp. 31-53 ◽  
Author(s):  
Anna A. Pestova ◽  
Natalia A. Rostova
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Economic Activity ◽  
Global Financial Crisis ◽  
Exchange Rate Regime ◽  
Aggregate Demand ◽  
Economic Effects ◽  
Theoretical Concepts ◽  
Empirical Estimates

Is the Bank of Russia able to control inflation and, at the same time, manage aggregate demand using its interest rate instruments? In other words, are empirical estimates of the effects of monetary policy in Russia consistent with the theoretical concepts and experience of advanced economies? This paper is aimed at addressing these issues. Unlike previous research, we employ “big data” — a large dataset of macroeconomic and financial data — to estimate the effects of monetary policy in Russia. We focus exclusively on the period after the 2008—2009 global financial crisis when the Bank of Russia announced the abandoning of its fixed ruble exchange rate regime and started to gradually transit to an interest rate management. Our estimation results do not confirm standard responses of key economic activity and price variables to tightening of monetary policy. Specifically, our estimates do not reveal a statistically significant restraining effect of the Bank of Russia’s policy of high interest rates on inflation in recent years. At the same time, we find a significant deteriorating effect of the monetary tightening on economic activity indicators: according to our conservative estimates, each of the key rate increases occurred in March and December 2014 had led to a decrease in the industrial production index by about 0.2 percentage points within a year.

Australia budget keeps defence spending commitments

2021 ◽  
Keyword(s):  
South China Sea ◽  
Interest Rates ◽  
Fiscal Year ◽  
National Politics ◽  
Content Type ◽  
Defence Spending ◽  
Low Interest Rates ◽  
Defence Expenditure ◽  
Conducive Environment ◽  
Made In

Significance With an election due soon, the governing Liberal-National Coalition’s pledge to ring-fence the defence spending commitments made in 2016 was under some pressure. However, defence spending in fiscal year 2021/22 will grow by over 4% in real terms and stay above the symbolic level of 2% of GDP. Impacts Growing popular and bipartisan concern with Chinese aggression is a conducive environment for increased defence spending. Low interest rates and a stronger Australian dollar are also supporting sustained levels of defence expenditure. Washington may increase pressure on Australia to conduct freedom of navigation exercises in the South China Sea. Major business groups are concerned that increased criticism of China in national politics will produce yet more punitive backlash.

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