scholarly journals Expected Inflation Phenomena on Inflation and Unemployment Tradeoff - Evidence from Indonesia

2021 ◽  
Vol 29 (1) ◽  
pp. 17-26
Author(s):  
Mangasa Augustinus Sipahutar
Keyword(s):  
Interest Rate ◽  
Dynamic Process ◽  
Phillips Curve ◽  
Jel Classification ◽  
Output Growth ◽  
Var Model ◽  
Purchasing Power ◽  
Economic Shocks ◽  
Monetary Expansion ◽  
Expected Inflation

This study is about Indonesian Phillips curve from 1990 to 2019 using a VAR model. I found inflation and unemployment tradeoff, but expected inflation is negative. Negative expected inflation will face difficulties to BI in managing interest rate stemmed from economic shocks. Monetary contraction will decrease output and increase both unemployment and inflation. Conversely, monetary expansion does not experience a significant output growth. Monetary expansion should be maintained at a longer period to increase output and purchasing power, then expected inflation will undergo a dynamic process to become positive as modified Phillips curve suggested. Keywords: expected inflation, inflation and unemployment tradeoff, Phillips curve JEL Classification: E31, E52, O42

Impacts of Real Depreciation and Appreciation on Aggregate Output in Taiwan

2018 ◽  
Vol 65 (1) ◽  
pp. 123-130
Author(s):  
Yu Hsing
Keyword(s):  
Interest Rate ◽  
Gross Domestic Product ◽  
Stock Price ◽  
Real Interest Rate ◽  
Jel Classification ◽  
Oil Price ◽  
Real Gross Domestic Product ◽  
Real Gdp ◽  
Expected Inflation ◽  
Deficit Spending

Extending the IS-MP-AS model, this article finds that real depreciation helped to raise real gross domestic product (GDP) during 1999.Q1-2010.Q2 whereas real appreciation helped to increase real GDP during 2010.Q3-2016.Q4. In addition, a lower world real interest rate, a higher stock price, a higher real oil price or a lower expected inflation would increase real GDP. More deficit spending as a percent of GDP does not affect real GDP.JEL Classification: F41, E62

scholarly journals An Empirical Analysis of Factors Affecting Bank Interest Margins: Evidence from the South East European Countries

2018 ◽  
Vol 21 (2) ◽  
pp. 81-98
Author(s):  
Mehmed Ganić
Keyword(s):  
Interest Rate ◽  
Empirical Analysis ◽  
Banking Sector ◽  
Output Growth ◽  
The South ◽  
Factors Affecting ◽  
East European ◽  
Interest Margins ◽  
See Region ◽  
Bank Concentration

This paper provides an empirical analysis of factors affecting Bank Interest Margins in eight countries of the South‑East European (SEE) region between 2000 and 2014. The purpose of this paper is to examine and investigate the main drivers of Bank Interest Rate Margins across selected countries throughout the SEE region. Also, the study explored the relationship between the dependent variable Interest Rate Spread (IRS – as a proxy variable for measuring variation in Bank Interest Rate Margins) and a set of selected banks’ specific variables in SEE by employing panel data estimation methodology. This research is based on aggregate data for the whole banking sector of each country. In line with some expectations, our findings confirm the importance of credit risk, bank concentration operative efficiency, and inflation expectations in determining Bank Interest Rate Margins. Interestingly, in contrast to the majority of recent empirical research, the study found an inverse relationship between the bank concentration variable and Bank Interest Rate Margins as well as between the operational efficiency variable and Bank Interest Rate Margins. Also, the study could not find statistically significant evidence that Bank Interest Rate Margins are determined by output growth, bank profitability (measured by ROA) or liquidity risk.

scholarly journals The Time-Varying Effects of Monetary Policy on House Prices in China: An Application of TVP-VAR Model with Stochastic Volatility

2018 ◽  
Vol 13 (4) ◽  
pp. 149 ◽  
Author(s):  
Weina Cai ◽  
Sen Wang
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
House Prices ◽  
Var Model ◽  
Time Varying ◽  
Credit Channel ◽  
Monetary Policy Shocks ◽  
Time Varying Parameter ◽  
Policy Shocks ◽  
Interest Rate Channel

The boom of housing market in China in recent years has attracted great concerns from all over the world. How monetary policy affects house prices in China becomes an essential topic. This paper studies the time-varying effects of monetary policy on house prices in China during 2005.7-2017.10, by using a time-varying parameter VAR model. This paper obtains three interesting results. First, there are time-varying features of the responses of house prices to monetary policy shocks half-year and 1-year ahead, no matter through interest rate channel or through credit channel. Second, interest rate channel and credit channel have been enhanced since financial crisis in 2008. Third, the responses of nominal house prices to monetary policy in China are mainly driven by the responses of real house prices, instead of inflation. Finally, this paper gives proper suggestions for each finding respectively to central bank in China.

scholarly journals Growth and Financing Behaviour of Firms of Textile Industry in Pakistan: A Panel Data Analysis.

2011 ◽  
Vol 50 (4II) ◽  
pp. 699-714 ◽  
Author(s):  
Ijaz Hussain
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Capital Structure ◽  
Textile Industry ◽  
Panel Data Analysis ◽  
Jel Classification ◽  
Negative Sign ◽  
Cost Of Debt ◽  
Positive Sign ◽  
Financial Leverage

High economic growth, extremely low nominal interest rate and negative real interest rate gave a boost to financial leverage (gearing ratio) of the textile sector to its peak in 2005. Firms are now are facing the consequence of high gearing. An explosion in their financing costs along with removal of textile quota from 2005 onwards and later on an acute energy crisis hampered their profitability and ability to repay their debt. This in turn contributed to non-performing loans which is now is likely to pose a big challenge for financial sector and push economy into another crisis. Most of the previous studies including a very few on capital structure of Pakistani firms focus on understanding only the firm specific determinants of financial leverage and completely ignore macroeconomic or institutional factors. Findings of this paper prove that all firm specific determinants including profitability and efficiency, firms‘ growth, risk and collateral excluding size significantly influence corporate financial leverage of textile industry in Pakistan. All macroeconomic variables including overall economic growth, equity market conditions and nominal cost of debt also have significant impact on corporate gearing. Negative sign with the composite measure of profitability and efficiency implies that banks are compelled to fund inefficient and unprofitable firms because demand for loans comes more from inefficient and unprofitable firms. Positive sign with growth and negative sign with risk is indicative of the fact that banks prefer to lend to growing rather than riskier firms. JEL classification: C13, C23, C51, L65, G10, G30 Keywords: Capital Structure Determinants, Corporate Financial Leverage, Corporate Gearing Ratio

scholarly journals Market Structure, Macroeconomic Shocks, and Banking Risk in Kenya

2016 ◽  
Vol 1 (2) ◽  
pp. 81-113
Author(s):  
Nderitu Kingori
Keyword(s):  
Growth Rate ◽  
Interest Rate ◽  
Market Structure ◽  
Interest Rate Risk ◽  
Risk Exposure ◽  
Economic Shocks ◽  
Macroeconomic Shocks ◽  
Net Interest Margin ◽  
The Interest Rate ◽  
Loan Growth

This paper investigates the effect of changing market structure and macroeconomic shocks on the borrowing and lending risk exposure of Kenyan commercial banks using a GMM estimation approach. Borrowing risk exposure was found not to be persistent, being mainly affected by the degree of concentration and external economic shocks. Interestingly, the results also suggest that changes in the short-term interest rate do not affect the net interest margin, which may imply that bank deposit and lending rates are rigid and that the interest rate channel may be ineffective. The lending risk exposure was found to be persistent, and it was affected by the degree of concentration, internal economic shocks, and external economic shocks. The positive relationship between degree of concentration as well as borrowing and lending risk exposure supports the concentration-fragility view, as the declining franchise value did not lower incentives for making good loans during the study period where the degree of concentration was on a downward trend. Further analysis of the factors contributing to the persistence of lending risk exposure using a PVAR model found that the banks' loan growth rate and the market interest rate were key determinants. The effect of the loan growth rate was about double the effect of interest rate risk, implying that risk taking by some of the medium-sized and small banks is the key determinant of the persistence of lending risk exposure.

scholarly journals The Unpleasant Arithmetic of the Taylor Rule

2020 ◽  
Vol 8 (3) ◽  
pp. p89
Author(s):  
Alejandro Rodriguez-Arana
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Phillips Curve ◽  
Taylor Rule ◽  
Independent Component ◽  
Elasticity Of Substitution ◽  
Interest Rate Rule

This paper analyzes the effect of a monetary policy that raises the reference interest rate in order to reduce inflation in a situation where the fiscal policy parameters remain constant. In an overlapping generation’s model and in the presence of an accelerationist Phillips curve and a Taylor rule of interest rates, it is observed that increasing the independent component of said rule leads to a solution that at least in a large number of cases is unstable. In the case where the elasticity of substitution is greater than one, inflation falls temporarily, but then it can increase in an unstable manner. One way to achieve stability is to establish an interest rate rule where Taylor’s principle is not met. However, in this case many times the increase in the independent component of this rule will generate greater long-term inflation.

scholarly journals Monetary Transmission through Interest Rate Channel in Vietnam Before and After the Crisis

2014 ◽  
Vol 222 ◽  
pp. 51-75
Author(s):  
Hương Trầm Thị Xuân ◽  
Vinh Võ Xuân ◽  
CẢNH NGUYỄN PHÚC
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Monetary Transmission ◽  
Var Model ◽  
Macroeconomic Theory ◽  
Cost Channel ◽  
Before And After ◽  
The Cost ◽  
The Impact ◽  
Interest Rate Channel

The paper employs the VAR model to examine the impact of monetary policy on the economy through interest rate channel (IRC) and levels of transmission before and after the 2008 crisis. The results indicate that in the period before the financial crisis, IRC exists in accordance with macroeconomic theory; however, the crisis period, in which increases in SBV monetary policy rates lead to increased inflation, has proved the existence of the cost channel of monetary transmission in Vietnam.

Estimating the New Keynesian Phillips Curve for the UK: evidence from the inflation-indexed bonds market

2017 ◽  
Vol 18 (1) ◽  
Author(s):  
Hardik A. Marfatia
Keyword(s):  
Phillips Curve ◽  
New Keynesian ◽  
Inflation Expectations ◽  
New Keynesian Phillips Curve ◽  
Indexed Bonds ◽  
Unobserved Component ◽  
Expected Inflation ◽  
Component Approach ◽  
Unobserved Component Model ◽  
The Uk

Abstract This paper utilizes the information in the inflation-indexed bonds market to estimate the New Keynesian Phillips Curve for the UK using an unobserved component approach. The main advantage of this approach comes from using the Kalman filter to explicitly estimate the unobserved expected inflation from the observed break-even inflation rates – the yield difference between the inflation-indexed bonds and the nominal bonds. Our results show that the expected inflation estimated from the unobserved component model plays a significant role in explaining the inflation dynamics in the UK. The evidence also suggests that the estimated inflation expectations are better able to capture the evolution of actual inflation process as compared to the break-even inflation rate as a proxy for expected inflation.

Liberalizzazione, concentrazione e diversificazione del sistema bancario italiano

2009 ◽  
pp. 7-19
Author(s):  
Angelo Baglioni
Keyword(s):  
Interest Rate ◽  
Southern Italy ◽  
Banking System ◽  
Jel Classification ◽  
European Market ◽  
Competitive Pressure ◽  
Defensive Strategy ◽  
Concentration Process ◽  
Deep Process ◽  
Single European Market

- Starting from the early nineties, the Italian banking system has undergone a deep process of deregulation, consolidation and diversification. The deregulation process has enabled Italian banks to enter new - geographical and product - markets. The single European market has introduced a competitive challenge from abroad. The concentration process may be explained on several grounds. Smaller banks have aimed at reaching a more efficient scale of production. Deals involving banks located in Northern and Southern Italy had a prudential rationale, given the weakness of Southern banks. Large banks have presumably pursued a defensive strategy, due to the threat of take-overs from abroad. An important role has been played by the moral suasion exerted by the Bank of Italy. Deregulation and consolidation have come along together with an increase of the competitive pressure, as shown by the decline of interest rate margins. Banks have reacted by diversifying their business, in order to expand their sources of revenue and to create switching costs for their customers (by selling bundles of services). Keywords: banks, deregulation, consolidation, competition Parole chiave: banche, liberalizzazione, concentrazione, concorrenza Jel Classification: G21 - L89

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