scholarly journals Medium-Run Implications of Changing Demographic Structures for the Macro-Economy

2017 ◽  
Vol 241 ◽  
pp. R58-R64 ◽  
Author(s):  
Yunus Aksoy ◽  
Henrique S. Basso ◽  
Ron P. Smith
Keyword(s):  
Interest Rates ◽  
Poor Performance ◽  
Theoretical Work ◽  
Output Growth ◽  
Annual Growth Rate ◽  
Demographic Structure ◽  
Real Interest Rates ◽  
Long Run ◽  
The Uk ◽  
The Impact

While there may be an important, but transitory, cyclical component in the poor performance of the past decade, we will emphasise the secular forces: the impact of demographic structure and innovation. We draw on the empirical and theoretical work reported in Aksoy, Basso, Smith and Grasl (2015), ABSG, about the impact of changes in demographic structure on macroeconomic outcomes. This suggests that changes in age profile not only have significant implications for savings, investment, real interest rates and growth but also for innovation. The size of the effects seems plausible. For instance, if in 2015 the UK had the 1970 age structure, it would have added 0.68 percentage points to the long-run annual growth rate. The model suggests that the population ageing predicted for the next decades will tend to reduce output growth and real interest rates across OECD countries.

Rental rate as an alternative pricing for Islamic home financing

2016 ◽  
Vol 9 (4) ◽  
pp. 601-626 ◽  
Author(s):  
Rosylin Mohd Yusof ◽  
Mejda Bahlous ◽  
Roszaini Haniffa
Keyword(s):  
Interest Rates ◽  
Islamic Law ◽  
Real Effective Exchange Rate ◽  
Alternative Measure ◽  
Islamic Banks ◽  
Content Type ◽  
Long Run ◽  
Rental Rate ◽  
The Uk ◽  
The Impact

Purpose This paper aims to contribute to the banking and housing market literature by proposing an alternative measure of rate of return for Islamic banks that is based on the rental rate of the property. This alternative Islamic mortgage pricing mechanism could be adopted by Islamic banks as a replacement for mortgage rates if it is found to be independent from any form of interest rates as required by Islamic law. Design/methodology/approach By investigating the short run and long run dynamics between rental price index (RPI) and the proposed Islamic Rental Rate (RR-I) and, three selected macroeconomic indicators in the UK via autoregressive distributed lag model, the authors examine the link between RPI, RR-I and the real economy. Findings The findings provide evidence that while RPI in the UK is significantly related to three leading macroeconomic variables, namely, gross domestic product (GDP), real effective exchange rate and interest rates measures, while RR-I is only impacted by changes in GDP. More importantly, the authors show that there is no short or long run dynamics between the rental rate and any form of interest rates. Research limitations/implications This paper did not attempt to investigate the impact of the physical attributes of the rental property to formalize the model describing the relationship between RPI and RR-I. Also, other macroeconomic factors like household income growth, risk, house value growth rate and taxation could be included in future models. Practical implications As Rental Rate is not linked to the macroeconomic determinants, it is therefore more stable, resilient and sustainable and, at the same time, making the financing less risky for both parties, as they are less susceptible to economic vulnerabilities. Social implications Some calculations incorporating the proposed RR-I can also be extended to the pricing of products based on other contracts such as Tawarruq, Bai Bithaman Ajil or even Murabahah for a fairer and just pricing to both the banks and customers. Originality/value The results suggest that Islamic banks should consider incorporating the proposed rental rate (RR-I) when pricing their home financing products, as this will lead to less dependence on interest rates for benchmarking. In addition, using the proposed rental rate (RR-I) reduces the exposure to the subjective evaluation by property valuators and speculative macroeconomic elements.

Rising prices are not a long-run UK economy risk

2021 ◽  
Keyword(s):  
Interest Rates ◽  
Relative Price ◽  
Real Interest Rates ◽  
Content Type ◽  
The Past ◽  
Price Adjustments ◽  
Long Run ◽  
The Future ◽  
High Inflation ◽  
The Uk

Significance There is little risk that inflation will return to heights seen in the 1980s as the authorities have the tools to control high inflation. However, their effective deployment depends on cooperation between the BoE and Her Majesty's Treasury (HM Treasury -- the finance ministry). Impacts The long-run demographic forces that kept real interest rates low in the past will continue to keep them low in the future. Low real rates and little risk of high inflation mean nominal rates will also remain low. Moderate inflation in the range 0-5% can be expected over the next decade. A dose of moderate inflation will be useful for the UK economy as it will ease the relative price adjustments needed during the recovery.

IMPACT OF REAL INTEREST RATES ON REAL OUTPUT GROWTH IN INDIA: A LONG-RUN ANALYSIS IN A LIBERALIZED FINANCIAL REGIME

2007 ◽  
Vol 52 (02) ◽  
pp. 215-231 ◽  
Author(s):  
HRUSHIKESH MALLICK ◽  
SHASHI AGARWAL
Keyword(s):  
Growth Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Banking System ◽  
Poor Quality ◽  
Output Growth ◽  
Long Run ◽  
Ardl Approach ◽  
The Impact

The study attempts to evaluate the impact of short-term real interest rate on growth rate in India in a liberalized financial and trade regime (March 1993 to March 2005). Using ARDL approach to cointegration of Pesaran and Shin (1999), the study finds that interest rate does not have a direct impact; rather, it may have an indirect and adverse impact on growth rate through the transmission channel of bank credit, thereby neither supporting the arguments advocated by Keynesians nor the explanations offered by the proponents of Financial Liberalization School. This incredible result may be attributed to the poor quality of credit disbursal of the banking system in India or low credit offtake for productive investment purposes as investment, an important determinant of economic growth, is governed by several other factors.

scholarly journals Mobile Money Use: The Impact of Macroeconomic Policy and Regulation

Economies ◽  
2021 ◽  
Vol 9 (2) ◽  
pp. 51
Author(s):  
Lorna Katusiime
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Financial Innovation ◽  
Macroeconomic Policy ◽  
Mobile Money ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
Long Run ◽  
Short Run ◽  
The Impact

This paper examines the effects of macroeconomic policy and regulatory environment on mobile money usage. Specifically, we develop an autoregressive distributed lag model to investigate the effect of key macroeconomic variables and mobile money tax on mobile money usage in Uganda. Using monthly data spanning the period March 2009 to September 2020, we find that in the short run, mobile money usage is positively affected by inflation while financial innovation, exchange rate, interest rates and mobile money tax negatively affect mobile money usage in Uganda. In the long run, mobile money usage is positively affected by economic activity, inflation and the COVID-19 pandemic crisis while mobile money customer balances, interest rate, exchange rate, financial innovation and mobile money tax negatively affect mobile money usage.

scholarly journals Was the Gibson Paradox for real? A Wicksellian study of the relationship between interest rates and prices

2014 ◽  
Vol 21 (2) ◽  
pp. 139-163 ◽  
Author(s):  
Jagjit S. Chadha ◽  
Morris Perlman
Keyword(s):  
Interest Rates ◽  
Positive Relationship ◽  
Formal Model ◽  
Natural Rate ◽  
Market Rate ◽  
Long Run ◽  
Advanced Economies ◽  
The Uk ◽  
Gibson Paradox ◽  
The Relationship

We examine the relationship between prices and interest rates for seven advanced economies in the period up to 1913, emphasising the UK. There is a significant long-run positive relationship between prices and interest rates for the core commodity standard countries. Keynes ([1930] 1971) labelled this positive relationship the ‘Gibson Paradox’. A number of theories have been put forward as possible explanations of the paradox but they do not fit the long-run pattern of the relationship. We find that a formal model in the spirit of Wicksell (1907) and Keynes ([1930] 1971) offers an explanation for the paradox: where the need to stabilise the banking sector's reserve ratio, in the presence of an uncertain ‘natural’ rate, can lead to persistent deviations of the market rate of interest from its ‘natural’ level and consequently long-run swings in the price level.

Human capital accumulation, income distribution, and economic growth: a demand-led analytical framework

2021 ◽  
Vol 9 (3) ◽  
pp. 319-336
Author(s):  
Gilberto Tadeu Lima ◽  
Laura Carvalho ◽  
Gustavo Pereira Serra
Keyword(s):  
Human Capital ◽  
Capital Accumulation ◽  
Analytical Framework ◽  
Output Growth ◽  
Human Capital Accumulation ◽  
Capital Utilization ◽  
Tax Rate ◽  
Long Run ◽  
The Impact ◽  
Long Run Equilibrium

This paper incorporates human capital accumulation through provision of universal public education by a balanced-budget government to a demand-driven analytical framework of functional distribution and growth of income. Human capital accumulation positively impacts on workers’ productivity in production and their bargaining power in wage negotiations. In the long-run equilibrium, a rise in the tax rate (which also denotes the share of output spent in human capital formation) lowers the pre- and after-tax wage share and physical capital utilization, and thus raises (lowers) the output growth rate when the latter is profit-led (wage-led). The impact of a higher tax rate on the employment rate (which also measures human capital utilization) in the long-run equilibrium is negative (ambiguous) when output growth is wage-led (profit-led). In any case, the supply of higher-skilled workers does not automatically create its own demand.

Ethics and Efficiency in the Provision of Health Care

1988 ◽  
Vol 23 ◽  
pp. 111-126 ◽  
Author(s):  
Alan Williams
Keyword(s):  
Health Care ◽  
Driving Force ◽  
Mortality Rates ◽  
Equal Access ◽  
Demographic Structure ◽  
Major Purpose ◽  
Relative Mortality ◽  
Distribution Rule ◽  
The Uk ◽  
The Impact

1.1. A major purpose in nationalizing the provision of health care in the UK was to affect its distribution between people, and, in particular, to minimize the impact of willingness and ability to pay upon that distribution. It has never been clear, however, what alternative distribution rule is to apply. There is no shortage of rhetoric about ‘equality’ and ‘need’, but most of it is vacuous, by which I mean it does not lead to any clear operational guidelines about who should get priority and at whose expense. The closest we have got so far to such explicit guidelines has been the formulae which determine the geographical distribution of NHS funds, the driving force behind which is a notion of need based on relative mortality rates and on the demographic structure. The avowed objective is to bring about equal access for equal need irrespective of where in the UK you happen to be.

scholarly journals Impact of Crude Prices on Retail Prices – A Time Series Analysis

2019 ◽  
Vol 8 (2S7) ◽  
pp. 606-612
Keyword(s):  
Time Series ◽  
Time Series Analysis ◽  
Crude Oil ◽  
Energy Demand ◽  
Multivariate Time Series ◽  
Secondary Data ◽  
Series Analysis ◽  
Long Run ◽  
The Uk ◽  
The Impact

The UK has emerged as one of the largest producers of petroleum in the world. A significant amount of petroleum is used for fulfilling the energy demand within the country. However, the country witnessed a different trend from 2015. This is mainly due to the increase in imports of petroleum in order to meet domestic needs. To this, there is a need to identify the impact of changes exist in petrol and crude oil prices in the UK. In this context, the researcher has undertaken primary research to derive conclusions which are case specific and can comply with the research aim. The study used secondary data for the year 2015-2018 and conducted multivariate time series analysis. A series of tests including unit root, ARIMA, and co-integration tests were used to derive the results. The study found that there was an asymmetric relationship between the movements of prices of crude oil with respect to retail fuel prices in the long run. However, the study is not without limitations which are represented at the end of the study following with its future scope

Macroeconomic shocks, fragility and home financing in Malaysia: can rental index be the answer?

2018 ◽  
Vol 9 (1) ◽  
pp. 17-44 ◽  
Author(s):  
Rosylin Mohd Yusof ◽  
Farrell Hazsan Usman ◽  
Akhmad Affandi Mahfudz ◽  
Ahmad Suki Arif
Keyword(s):  
Interest Rates ◽  
Islamic Banks ◽  
Macroeconomic Shocks ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
Rental Rate ◽  
Conventional Banks ◽  
The Impact ◽  
Conventional And Islamic Banks

Purpose This study aims to investigate the interactions among macroeconomic variable shocks, banking fragility and home financing provided by conventional and Islamic banks in Malaysia. Identifying the causes of financial instability and the effects of macroeconomic shocks can help to foil the onset of future financial turbulence. Design/methodology/approach The autoregressive distributed lag bound-testing cointegration approach, impulse response functions (IRFs) and forecast error variance decomposition are used in this study to unravel the long-run and short-run dynamics among the selected macroeconomic variables and amount of home financing offered by both conventional and Islamic banks. In addition, the study uses Granger causality tests to investigate the short-run causalities among the selected variables to further understand the impact of one macroeconomic shock to Islamic and conventional home financing. Findings This study provides evidence that macroeconomic shocks have different long-run and short-run effects on amount of home financing offered by conventional and Islamic banks. Both in the long run and short run, home financing provided by Islamic banks is more linked to real sector economy and thus is more stable as compared to home financing provided by conventional banks. The Granger causality test reveals that only gross domestic product (GDP), Kuala Lumpur Syariah Index (KLSI)/Kuala Lumpur Composite Index (KLCI) and house price index (HPI) are found to have a statistically significant causal relationship with home financing offered by both conventional and Islamic banks. Unlike the case of Islamic banks, conventional home financing is found to have a unidirectional causality with interest rates. Research limitations/implications This study has focused on analyzing the macroeconomic shocks on home financing. However, this study does not assess the impact of financial deregulation and enhanced information technology on amount of financing offered by both conventional and Islamic banks. In addition, it is not within the ambit of this present study to examine the effects of agency costs and information asymmetry. Practical implications The analysis of cointegration and IRFs exhibits that in the long run and short run, home financing provided by Islamic banks are more linked to real sector economy like GDP and House Prices (HPI) and therefore more resilient to economic vulnerabilities as compared to home financing provided by conventional banks. However, in the long run, both conventional and Islamic banks are more susceptible to fluctuations in interest rates. The results of the study suggest that monetary policy ramifications to improve banking fragility should focus on stabilizing interest rates or finding an alternative that is free from interest. Social implications Because interest plays a significant role in pricing of home loans, the potential of an alternative such as rental rate is therefore timely and worth the effort to investigate further. Therefore, Islamic banks can explore the possibility of pricing home financing based on rental rate as proposed in this study. Originality/value This paper examines the unresolved issues in Islamic home financing where Islamic banks still benchmark their products especially home financing, to interest rates in dual banking system such as in the case of Malaysia. To the best of the authors’ knowledge, studies conducted in this area are meager and therefore is imperative to be examined.

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