scholarly journals Reforming LIBOR and Other Financial Market Benchmarks

2015 ◽  
Vol 29 (2) ◽  
pp. 191-212 ◽  
Author(s):  
Darrell Duffie ◽  
Jeremy C. Stein
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Banking System ◽  
Economic Role ◽  
News Reports ◽  
Legal Risks ◽  
The Difference ◽  
The Interest Rate ◽  
Orderly Transition

LIBOR is the London Interbank Offered Rate: a measure of the interest rate at which large banks can borrow from one another on an unsecured basis. LIBOR is often used as a benchmark rate— meaning that the interest rates that consumers and businesses pay on trillions of dollars in loans adjust up and down contractually based on movements in LIBOR. Investors also rely on the difference between LIBOR and various risk-free interest rates as a gauge of stress in the banking system. Benchmarks such as LIBOR therefore play a central role in modern financial markets. Thus, news reports in 2008 revealing widespread manipulation of LIBOR threatened the integrity of this benchmark and lowered trust in financial markets. We begin with a discussion of the economic role of benchmarks in reducing market frictions. We explain how manipulation occurs in practice, and illustrate how benchmark definitions and fixing methods can mitigate manipulation. We then turn to an overall policy approach for reducing the susceptibility of LIBOR to manipulation before focusing on the practical problem of how to make an orderly transition to alternative reference rates without raising undue legal risks.

scholarly journals Does the Interest Rate Form Business Cycle?

2019 ◽  
Vol 4 (1) ◽  
pp. 29-34
Author(s):  
Bijan Bidabad ◽  
Abul Hassan
Keyword(s):  
Interest Rate ◽  
Business Cycle ◽  
Interest Rates ◽  
Banking System ◽  
Real Economy ◽  
Short Term ◽  
The Usa ◽  
Rate Form ◽  
The Interest Rate

Dynamic structural behavior of depositor, bank and borrower and the role of banks in forming business cycle are investigated. We test the hypothesis that does banks behavior make oscillations in the economy through the interest rate. By dichotomizing banking activities into two markets of deposit and loan, we show that these two markets have non-synchronized structures, and this is why the money sector fluctuation starts. As a result, the fluctuation is transmitted to the real economy through saving and investment functions. Empirical results assert that in the USA, the banking system creates fluctuations in the money sector and real economy as well through short-term interest rates

Role of Negative Interest Rates for Energy Assets Pricing in Financial Markets

2021 ◽  
pp. 107-119
Author(s):  
Ismail Ismailov ◽  
Tomonobu Senjyu
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
World Economy ◽  
Foreign Currency ◽  
Banking System ◽  
Negative Interest Rates ◽  
The World ◽  
Energy Assets ◽  
National Banking System

The world economy strives for globalization, and most energy assets are connected with each other through correspondent banks and other mutual operations. The relevance of the topic of the thesis is due to the fact that in September 2019 a number of proposals were made to introduce the practice of negative interest rates in the national banking system due to the fact that Russian energy assets are not profitable to place in foreign currency..

Finance and Capital in the United States, 1850–1900

1967 ◽  
Vol 27 (4) ◽  
pp. 621-624 ◽  
Author(s):  
Richard Sylla
Keyword(s):  
Nineteenth Century ◽  
Financial Markets ◽  
Gilded Age ◽  
Banking System ◽  
The United States ◽  
Antebellum Era ◽  
Long Run ◽  
Short Run ◽  
Rapid Industrialization

The connections between financial development and economic growth are drawing increased attention on many fronts. This dissertation studies ways in which the American financial system functioned to aid in the accumulation and mobilization of capital in the second half of the nineteenth century. The evolution of the banking system, by far the dominant nineteenth-century financial intermediary, is emphasized, but the role of Federal government finance is of scarcely less importance. The interrelated actions of the banks and the Treasury did much to set the tone in various financial markets during most of the period. While considerable study has been devoted to these actions and their short-run effects, much less has been written about their long-run implications. A major contention of the work is that financial strains caused by the Civil War and the various responses to these strains were accompanied by significant changes in the banking system—in its structure, the types of assets in which it dealt, and in its relations with the Treasury—all of which increased its potential for satisfying the demands placed upon it by a rapidly expanding economy. These changes helped to make capital, which may well have been the relatively scarce factor in the antebellum era, more abundant in the postwar Gilded Age, and they therefore abetted the rapid industrialization of those decades.

scholarly journals Creating Values for Sustainability: Stakeholders Engagement, Incentive Alignment, and Value Currency

2012 ◽  
Vol 2012 ◽  
pp. 1-9 ◽  
Author(s):  
Frank T. Lorne ◽  
Petra Dilling
Keyword(s):  
Value Creation ◽  
Institutional Economics ◽  
Evaluation Method ◽  
Evolutionary Process ◽  
New Institutional Economics ◽  
Incentive Alignment ◽  
Economic Role ◽  
Shareholder Theory ◽  
The Difference

A shareholder theory of firm and a stakeholder theory of firm may differ in their respective evaluation method of firm performance. Both theories however recognize the importance of value creation as the economic role of firms as institutions. The New Institutional Economics (NIE) emphasizes incentives alignment, while also viewing stakeholder engagements as methods to expand the boundaries of firms. The difference in performance evaluation between the two approaches can be reduced if stakeholders, while formulating incentive alignment, also evaluate the mechanisms of establishing a common currency value. The concomitant development of stakeholder engagement, incentive alignment, and value currency creation is argued to be an evolutionary process with the efficiency implications of the two theories tending to converge.

scholarly journals A FINANCIAL ANALYSIS OF RESWITCHING

2021 ◽  
pp. 220-244
Author(s):  
Rafael García Iborra
Keyword(s):  
Interest Rate ◽  
Business Cycle ◽  
Interest Rates ◽  
Inverse Relationship ◽  
Financial Analysis ◽  
Banking System ◽  
Weighted Average ◽  
Business Cycle Theory ◽  
Natural Level ◽  
The Interest Rate

The classical Austrian Business Cycle Theory (ABCT) is based on an inverse relationship between the so-called Average Period of Production (APP) or ‘roundaboutness’ and the interest rate. According to Böhm-Bawerk (1884 [1891]), the APP is the weighted average time that a unit of labor is locked up in the production process1; moreover, there is a positive relationship between savings (the ‘subsistence fund’) and the APP: the higher the latter the higher the former, which implies an inverse relationship between interest rates and the APP. Thus, a lower interest rate will lead to a higher APP ceteris paribus. Hayek (2008) based his Hayekian triangles on Böhm-Bawerk’s work: a lower (higher) interest rate leads to a more (less) rounda- bout structure of production, increasing (decreasing) the APP. Including Mises’s (1921) business cycle theory into the analysis, whenever the interest rate is pushed lower than its ‘natural level’, either by the central bank or the banking system, there is an unsus- tainable extension of the APP that will generate an economic boom; the crisis will irremediably follow, as the APP will pull back towards its natural level. From this brief characterization of the ABCT, it is easy to notice the key role of the inverse relationship between interest rates and roundaboutness; without it, there is no connection from changes in interest rates and roundaboutness, and the ABCT falls apart. The reswitching of techniques is precisely a counterexample to that relationship, as it claims there are situations in which lower interest rates do not lead to more roundabout productive struc- tures. The organization of this paper is as follows: the next section describes the reswitching of techniques as stated by Samuelson (1966) and the implication for the classical ABCT, based on a phys- ical measure of roundaboutness; section 3 analyzes the alternative of applying corporate finance to the ABCT following Cachanosky and Lewin (2014). Section 4 is a financial analysis of Samuelson’s example, argues why modified duration should replace Böhm- Bawerk’s APP as a measure of roundaboutness, and shows why it does not represent a paradox to the ABCT when the financial approach is used. Sections 5 and 6 address the question from two additional perspectives: a neoclassical with fully flexible prices but fixed techniques and the Austrian related dynamic efficiency.

scholarly journals Complete and competitive financial markets in a complex world

2021 ◽  
Author(s):  
Gianluca Cassese
Keyword(s):  
Probability Measure ◽  
Financial Markets ◽  
Sample Space ◽  
Market Imperfections ◽  
Competitive Environment ◽  
Complex World ◽  
Economic Role

AbstractWe investigate the possibility of completing financial markets in a model with no exogenous probability measure, with market imperfections and with an arbitrary sample space. We also consider whether such an extension may be possible in a competitive environment. Our conclusions highlight the economic role of complexity.

scholarly journals Pengaruh Faktor Internal Spesifik Bank Terhadap Interest Rate di Perusahaan Sektor Perbankan

2019 ◽  
Vol 19 (1) ◽  
pp. 16
Author(s):  
Ilma Meidira Eprianto ◽  
Catur Rahayu Martiningtiyas
Keyword(s):  
Interest Rate ◽  
Credit Risk ◽  
Interest Rates ◽  
Design Methodology ◽  
Operational Efficiency ◽  
Internal Factors ◽  
Specific Factors ◽  
The Difference ◽  
The Interest Rate ◽  
Positive Effect

<p><strong>Abstrak</strong></p><p><strong>Tujuan</strong> - Penelitian ini bertujuan untuk mengetahui pengaruh faktor spesifik internal bank terhadap <em>interest rate</em>.</p><p><strong>Desain/Metodologi/Pendekatan</strong>  - Regresi data panel berganda yang digunakan  untuk mengukur pengaruh faktor spesifik internal bank seperti <em>liquidity</em>, <em>operational efficiency</em>, <em>credit risk</em>, <em>capitalization</em>, dan <em>lending out ratio</em> terhadap interest rate</p><p><strong>Hasil</strong> – Penelitian ini menemukan bahwa <em>efficiency</em> dan <em>credit</em> <em>risk</em> memiliki pengaruh positif yang signifikan terhadap <em>interest rate </em>sedangkan <em>liquidity</em>, <em>capitalization</em> dan <em>lending out ratio </em>tidak berpengaruh terhadap <em>interest rate</em>.</p><p><strong>Keterbatasan/Nilai </strong>– Pengukuran <em>interest rate</em> tidak menggunakan suku bunga sbi tetapi perhitungan selisih antara suku bunga pinjaman dan suku bunga deposito.</p><p><strong> </strong></p><p><strong>Abstract</strong></p><p><strong>Proposed</strong> - This study aims to determine the effect of bank's specific internal factors on interest rates.</p><p><strong>Design/Methodology/Approach</strong>  - Mutiple panel data was used to analyse bank internal specific factors, namely liquidity, operational efficiency, credit risk, capitalization, and lending out ratio to the interest rate.</p><p><strong>Result</strong>  – The results of this study indicate that efficiency and credit risk have a significant positive effect on interest rates while liquidity but capitalization and lending out ratio do not affect the interest rate</p><p><strong>Novelty/Value</strong> - Interest rate measurement does not use the SBI interest rate but calculates the difference between the loan interest rate and the deposit rate.</p>

scholarly journals Financial Development And Growth In Middle Eastern Countries

2010 ◽  
Vol 9 (11) ◽  
Author(s):  
Mounther Barakat ◽  
Edward Waller
Keyword(s):  
Economic Growth ◽  
Financial Markets ◽  
Financial Development ◽  
Financial Intermediation ◽  
Middle Eastern ◽  
Banking System ◽  
Specific Factors ◽  
The Relationship

This paper studies the relationship between financial intermediation and economic growth in a sample of Middle Eastern countries.  The results are consistent with the hypothesis that a well-functioning banking system promotes economic growth.  Moreover, the results suggest that market-specific factors may hinder financial markets’ ability to play hypothesized roles, while enhancing the role of intermediaries.  The paper’s general conclusion is that financial development does affect economic growth.  However, market specific factors affect the magnitude and significance of this effect.  The implication is that studies should control for market-specific factors to assess the relationship between financial development and growth.

scholarly journals Regulacija financijskog tržišta prije i nakon svjetske krize

2017 ◽  
Vol 5 (1) ◽  
Author(s):  
Anita Radman Peša ◽  
Vanja Zubak ◽  
Duje Mitrović
Keyword(s):  
Risk Management ◽  
Financial Markets ◽  
Interest Rates ◽  
Financial Market ◽  
Financial Risk ◽  
Banking Sector ◽  
Financial Regulation ◽  
Banking System ◽  
Financial Risk Management ◽  
Macroeconomic Stability

The banking sector in the global economic system is an area of great impact on the preservation of macroeconomic stability. As it turned out, and during the recent economic crisis, whose consequences are still felt in many countries, the collapse of the financial markets has farreaching effects on all of the national financial markets. The aim of this paper is to analyze the existing regulation of the financial markets and its (lack of) performance in the current financial risk management in order to preserve macroeconomic stability, and provide a secure and stable banking system. The purpose of the study was to present financial regulation before the crisis of 2008 / 2009, and to compare it with the regulations issued after the global crisis of 2008 / 2009 in order to conclusion whether it is cosmetic or real changes of regulating the financial system, and whether existing regulation in the future successfully prevent minor and major disruptions of the financial markets. Croatian financial market is especially analysed in the case of manipulation using the benchmark interest rates.

scholarly journals PERBANDINGAN PENGARUH SUKU BUNGA DAN INFLASI TERHADAP KREDIT DAN PEMBIAYAAN (Studi Kasus pada Bank Umum Konvensional dan Bank Umum Syariah periode 2011-2015)

IQTISHODUNA ◽  
2017 ◽  
Vol 12 (2) ◽  
pp. 91-97
Author(s):  
Hasannudin Nursalim Putra ◽  
Irnin Miladyan Aryq ◽  
Lilik Jazilatul Mufidah
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Path Analysis ◽  
The State ◽  
Financial Policy ◽  
The Third ◽  
The Interest Rate ◽  
Policy Interest

Inflationary pressures that often time there was a can shake economy the state, to face inflationarypressures one of the efforts of the country to control the inflation is by issuing policy interest rate by theIndonesia bank as central financial policy monetary and fiscal. The banks have the role of to control the rateinflation. The interest rate that set by the bank will affect the level distribution credit of bank conventional andfinancing of sharia bank. For that researchers want to see the influence of direct and indirect interest rates tocredit and financingand inflation as variable intervening. The kind of research is quantitative with the sampleof six general Sharia Bank and the generalconventional bank in Indonesia period 2011 until 2015 taken withpurposive sampling. Themethod is path analysis. Based onsignificant test, the first significant test has resultthat interest rates significant of inflation. Thesecond significant testhas results that the interest rate notsignificant on the distribution credit and financing. The third significant test has result that inflation is notsignificant to distribution credit and financing. So this is can concluded that inflation will not be variableintervening for the distribution credit and financing.

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