scholarly journals Risk Premia and the Real Effects of Money

2020 ◽  
Vol 110 (7) ◽  
pp. 1995-2040 ◽  
Author(s):  
Sebastian Di Tella
Keyword(s):  
Interest Rates ◽  
Risk Premium ◽  
Risk Sharing ◽  
Optimal Allocation ◽  
Price Theory ◽  
The Real ◽  
Friedman Rule ◽  
Real Effects ◽  
Tax Subsidy

This paper proposes a flexible-price theory of the role of money in an economy with incomplete idiosyncratic risk sharing. When the risk premium goes up, money provides a safe store of value that prevents interest rates from falling, reducing investment. Investment is too high during booms when risk is low, and too low during slumps when risk is high. Monetary policy cannot correct this: money is superneutral and Ricardian equivalence holds. The optimal allocation requires the Friedman rule and a tax/subsidy on capital. The real effects of money survive even in the cashless limit. (JEL E32, E41, E43, E44, E52)

The relationships between time deposit rates, real rates, inflation and risk premium

2020 ◽  
Vol 11 (5) ◽  
pp. 1033-1053
Author(s):  
Siew-Peng Lee ◽  
Mansor Isa ◽  
Noor Azryani Auzairy
Keyword(s):  
Interest Rates ◽  
Risk Premium ◽  
Banking System ◽  
Islamic Banks ◽  
Content Type ◽  
The Real ◽  
Explanatory Variables ◽  
Time Deposit ◽  
Causality Tests ◽  
Conventional And Islamic Banks

Purpose The purpose of this paper is to investigate the influence of the real interest rates, inflation and risk premium on the time deposit rates of banks in the dual banking system in Malaysia. Design/methodology/approach The data consists of 1-, 6- and 12-month average time deposit rates of conventional and Islamic banks over the period of January 2000 to June 2017. The cointegration methodologies are used to explore links between the time deposit rates, real rates, inflation and risk premium. The causality tests to test causality linkages between pairs of variables are also applied. The generalised forecast error variance decomposition based on the error correction model is conducted to analyse the impact of variables variation on the deposit rates. Findings The results show the presence of two cointegration vectors in the deposit rates, real rates, inflation and risk premium, for both conventional and Islamic bank rates. Causality tests reveal that deposit rates are caused by inflation and risk premium in a one-way causality. The results of variance decomposition highlight the importance of inflation and risk premium in explaining the variations in the bank deposit rates. For the conventional bank, inflation shocks play the most important role in explaining the movements of the deposit rates. In Islamic banks, the major determinant’s largest influence is the risk premium. Between the two bank rates, Islamic bank rates receive more influence from the explanatory variables in the long-run compared to conventional bank rates. The real rates have no noticeable effect on the variance of time deposit rates for both banks. Originality/value This study presents new evidence on the relationship between time deposit rates and the three explanatory variables, which are the real interest rates, inflation and risk premium, for both conventional and Islamic banks in Malaysia. The dual banking system allows exploring the similarities and differences between conventional and Islamic banks in Malaysia in terms of the linkages between the variables.

Lending to the real sector of the region’s economy: state, problems, prospects

2020 ◽  
pp. 42-49
Author(s):  
Iryna Pasinovych ◽  
Viktoriya Dmytruk
Keyword(s):  
Interest Rates ◽  
Capital Investment ◽  
Banking Sector ◽  
Foreign Currency ◽  
Point Of View ◽  
Real Sector ◽  
Real Economy ◽  
Labor Costs ◽  
The Real

Approaches to the essence and constituent elements of the real economy sector are analyzed, its optimal structure is determined. It is focused on servicing and infrastructural role of banks in relation to the entities of the real sector. The dynamics of the lending to the real sector of the economy and the level of its penetration is analyzed. The paper reveals that the growth of lending in this sector was restored only last year, but the level of penetration continues to decline. The banking sector is analyzed. The paper argues that it has become profitable for the first time since the crisis, but mainly due to reduction of deductions to reserves. The financial situation of enterprises of the real sector of the Ukrainian economy is estimated. After an increase in profitability, it was again observed to have fallen due to the growth of competition and labor costs. Production are found to have increased in the real sector, but the role of loans in its development is insignificant. The emphasis is placed on the leading role of banks in the region for business development. The regional features of lending to the real economy sector in the Lviv region are outlined. The paper determines that in this region the growth of industrial products is much higher than the average in Ukraine, while the share of balances on loans granted is one of the lowest. There are the tendencies towards the decrease of the number of banks in the given region, increase of balances of banks' claims on loans in absolute value, prevalence of long-term loans and foreign currency loans. By the share of received loans the processing industry is in second place, agriculture is in the third place. Low level of the share of unemployed loans, higher than the average in Ukraine indicator of the proportion of loans in capital investment, as well as higher interest rates on loans are the features of regional lending in the Lviv region. The factors limiting the obtaining of loans from the point of view of management entities of the studied region are outlined. Certain NBU branches are dominant in the Lviv region as for lending. The changes in the regulatory environment at the macroeconomic level that are directly related to lending are analyzed. The regulator's policy to revive lending to the real sector should be extremely cautious and systematic, aimed at limiting the concentration of risks, preventing excessive lending growth, increasing the stability of financial infrastructure and reducing the dollarization of the banking sector. Measures to increase lending in the Lviv region are outlined. The involvement of banks in the Lviv educational-industrial hub is proposed.

The Real Effects of Capital Inflows on Emerging Markets

2001 ◽  
Vol 04 (02) ◽  
pp. 165-202
Author(s):  
Robert Dekle ◽  
Cheng Hsiao ◽  
Siyan Wang
Keyword(s):  
Exchange Rates ◽  
Interest Rates ◽  
Latin American ◽  
Real Exchange Rates ◽  
East Asian ◽  
Capital Inflows ◽  
Real Output ◽  
The Real ◽  
Real Effects ◽  
The Impact

We employ vector autoregression and cointegration estimation to examine the impact of net capital inflows on real exchange rates, output and real interest rates in several East Asian and Latin American economies during the 1990s. We find that increases in net capital inflows leads to appreciations of the real exchange rates in all the countries but have no impact on real output except for Thailand.

Maximization Postulates and Their Efficacy for Islamic Economics

2002 ◽  
Vol 19 (1) ◽  
pp. 95-118 ◽  
Author(s):  
Zubair Hasan
Keyword(s):  
Mathematical Concept ◽  
Moral Values ◽  
Wide Field ◽  
Price Theory ◽  
Current Position ◽  
The Real ◽  
Theory Formation ◽  
Per Se ◽  
Field Of Inquiry

This paper examines the nature and role of maximization postu­lates concerning profit and utility in the mainstream price theory formation, from a methodological perspective. Mainstream eco­nomics retains these postulates, despite much criticism, mainly for two reasons. Firstly, they help establish cause-effect linkages among economic variables and markets. In that they greatly facil­itate predictions and their empirical veri_fication over a wide field of inquiry. Secondly, no other behavioral rule has so far been established that gives equally valid, if not superior, results over such range. ft is argued that the postulates are required in fslamic econom­ics as well for the same reasons. Maximization, per se, is not un-Islamic: what is maximized, how and for what purpose are the real issues to investigate before passing judgment. Contrary to the current position in the I iterature, we find it preferable to include moral values and social considerations of Islam in the assumptions of economic theorems, rather than attempting to include them in the objective elements of the models, until Islamic economics evolves as an independent subject. For max­imization is a mathematical concept, and cannot fruitfully accommodate what cannot somehow be measured.

scholarly journals A kelet-közép-európai háztartási megtakarításokat és eladósodást meghatározó makrogazdasági tényezők = The determinants of household savings

2021 ◽  
Vol 16 (2) ◽  
pp. 116-127
Author(s):  
Viktória Endrődi-Kovács ◽  
Gábor Kutasi ◽  
Tímea Adél Tóth
Keyword(s):  
Economic Growth ◽  
Regression Analysis ◽  
Interest Rates ◽  
Neoclassical Economics ◽  
Panel Regression ◽  
Eastern European ◽  
Household Savings ◽  
Macroeconomic Variables ◽  
The Real

A különböző közgazdasági irányzatok között egységes álláspont, hogy a háztartások megtakarítása a beruházáson keresztül a gazdasági növekedés egyik motorja. Azt illetően azonban, hogy a lakossági megtakarításokat, illetve az eladósodottságot milyen tényezők határozzák meg, éles vita figyelhető meg a szakirodalomban. Amíg például a neoklasszikus közgazdaságtan a kamatlábra helyezi a hangsúlyt, addig a keynesi megközelítés inkább a jövedelemre. A tanulmány a kelet-közép-európai (V4+3) gazdaságok háztartási megtakarítására vonatkozóan végez OLS panelregressziós elemzést. A különböző torzító hatások kiszűrésével beazonosítja azokat a makrogazdasági változókat, amelyek ténylegesen hatnak a háztartási szektor megtakarításaira és eladósodására. Mindebből következtetni lehet a hatékony megtakarítás-ösztönzőkre. = There is a common approach among the various economics schools that households’ savings are an engine of the economic growth by investments. However, a sharp discussion can be observed in the literature about the real determinant factors of household savings and indebtedness. While the neoclassical economics focuses on interest rates among others, the Keynesian approach emphasises rather the role of income. The study performs OLS panel regression analysis about the household savings of Central and Eastern European (V4+3) economies. It identifies the macroeconomic variables that factually affect the households’ savings and indebtedness by filtering the various distorting effects. The results give opportunity to conclude about the effective incentives for savings.

scholarly journals Interest rates, banking spreads and credit supply: the real effects

1997 ◽  
Vol 3 (2) ◽  
pp. 107-136 ◽  
Author(s):  
F. Barran ◽  
V. Coudert ◽  
B. Mojon
Keyword(s):  
Interest Rates ◽  
The Real ◽  
Real Effects ◽  
Credit Supply
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