THE EFFICIENCY-STABILITY TRADE-OFF: THE CASE OF HIGH INTEREST RATE SPREADS IN VENEZUELA

2007 ◽  
Vol 45 (1) ◽  
pp. 1-26 ◽  
Author(s):  
Leonardo VERA ◽  
Luis ZAMBRANO-SEQUÍN ◽  
Andreas FAUST
Keyword(s):  
Interest Rate ◽  
High Interest Rate ◽  
Trade Off ◽  
High Interest ◽  
Interest Rate Spreads

scholarly journals Infrequent Portfolio Decisions: A Solution to the Forward Discount Puzzle

2010 ◽  
Vol 100 (3) ◽  
pp. 870-904 ◽  
Author(s):  
Philippe Bacchetta ◽  
Eric van Wincoop
Keyword(s):  
Interest Rate ◽  
International Finance ◽  
Foreign Currency ◽  
Welfare Gain ◽  
High Interest Rate ◽  
Portfolio Decisions ◽  
High Interest ◽  
Currency Management ◽  
Forward Discount

A major puzzle in international finance is that high interest rate currencies tend to appreciate (forward discount puzzle). Motivated by the fact that only a small fraction of foreign currency holdings is actively managed, we calibrate a two-country model in which agents make infrequent portfolio decisions. We show that the model can account for the forward discount puzzle. It can also account for several related empirical phenomena, including that of “delayed overshooting.” We also show that making infrequent portfolio decisions is optimal as the welfare gain from active currency management is smaller than the corresponding fees. (JEL F31, G11, G15)

What Would Have Happened in Indonesia if Different Economic Policies Had Been Implemented When the Crisis Started?

2002 ◽  
Vol 1 (2) ◽  
pp. 75-103 ◽  
Author(s):  
Iwan J. Azis
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Income Distribution ◽  
High Interest Rate ◽  
Interest Rate Policy ◽  
Net Worth ◽  
High Interest ◽  
Lower Interest Rate ◽  
Rate Policy ◽  
Business Confidence

Many models of the Indonesian economy cannot generate the large collapses in output and exchange rate experienced in 1997–98. The model in this paper was able to replicate the actual events by adding several new links. One new link is between the depreciation of the exchange rate and the deterioration of the balance sheets of firms, which are in turn linked to decline in investment. Another new link is between decline in output and decline in business confidence, leading to possible increased capital outflow and exchange rate collapse. The IMF's high interest rate policy did not succeed in strengthening the rupiah because it inflicted such severe damage on the net worth of Indonesian firms that it caused capital flight to accelerate, turning what was originally just a financial crisis into a major recession. Two alternative counterfactual policy packages are examined: (1) a lower interest rate policy and (2) a lower interest rate policy combined with a partial write-down of the external debt. The model indicates that the country's macroeconomic conditions would have fared better if the prolonged high interest rate policy had been avoided. The results suggest that early actions should have been undertaken to address the mounting private foreign debts. The delayed handling of private debts had prevented other policies from working effectively. The two counterfactual policies also would have resulted in a more favorable outcome for income distribution and poverty incidence. The model revealed a close correlation between worsening (improving) income distribution and increasing (declining) interest rates.

scholarly journals Analysis of Smallholder Farmers Repayment of Bank of Agriculture Loan in Ezza South Local Government Area of Ebonyi State, Nigeria (2009-2018)

2021 ◽  
Vol 8 (4) ◽  
pp. 198-208
Author(s):  
Mbam B. N ◽  
Nwibo S. U ◽  
Nwofoke C ◽  
Egwu P. N ◽  
Odoh N.E
Keyword(s):  
Interest Rate ◽  
Local Government ◽  
Smallholder Farmers ◽  
Primary Source ◽  
Sampling Technique ◽  
Payback Period ◽  
Local Government Area ◽  
High Rate ◽  
High Interest Rate ◽  
High Interest

Smallholder farmer’s repayment of Bank of Agriculture (BOA) loan in Ezza South Local Government Area of Ebonyi State was studied using 120 smallholder farmer beneficiaries selected using multistage sampling technique. Data were collected from primary source only using structured questionnaire and analyzed using both descriptive and inferential statistics. Results showed default of 32.3% as out of N333, 997,620.50 were disbursed to the farmers a total of N226, 080,887.00 were repaid. However, the socioeconomic characteristics of the loan beneficiaries contributed about 75 % (R2 = 0.754) significant influence on repayment of Bank of Agriculture loan. Meanwhile, high interest rate, excessive bureaucracy, high rate of illiteracy, late approval of loan, lack of collateral, short payback period, and low farm output were identified as the major constraints to the repayment of BOA loan. It is recommended that as a measure to promote efficient and timely repayment of BOA loans by the farmers, management of BOA should address the institutional factors such as high interest rate, excessive bureaucracy and late approval of loan, high-value collateral and short payback period that were identified as the major constraints to BOA loan repayment.

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

2011 ◽  
Vol 101 (7) ◽  
pp. 3477-3500 ◽  
Author(s):  
Hanno Lustig ◽  
Adrien Verdelhan
Keyword(s):  
Interest Rate ◽  
Cross Section ◽  
Foreign Currency ◽  
Investment Strategy ◽  
Risk Premia ◽  
Currency Risk ◽  
Sampling Uncertainty ◽  
Consumption Growth ◽  
High Interest Rate ◽  
High Interest

The consumption growth beta of an investment strategy that goes long in high interest rate currencies and short in low interest rate currencies is large and significant. Consumption risk price differs significantly from zero, even after accounting for the sampling uncertainty introduced by the estimation of the consumption betas. The constant in the regression of average returns on consumption betas is not significant. Additionally, this investment strategy's consumption and market betas increase during recessions and times of crisis, when risk prices are high, implying that the unconditional betas understate its riskiness. JEL: C58, E21, F31, G11, G12

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