scholarly journals Interest Rate Policy Of Selected Central Banks In Central And Eastern Europe

2015 ◽  
Vol 18 (1) ◽  
pp. 25-41
Author(s):  
Tomasz Grabia
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Eastern Europe ◽  
Central And Eastern Europe ◽  
Central Banks ◽  
Theoretical Description ◽  
Interest Rate Policy ◽  
National Bank ◽  
Rate Policy ◽  
Economic Growth Rates

The aim of this article is to present and evaluate interest rate policies of three selected central banks in Central and Eastern Europe (Poland, the Czech Republic, and Hungary) from 2001 to 2013. The study consists of an introduction (Section 1) and three main parts. The introduction contains a theoretical description of the role of interest rate policy, the dilemmas connected with it, as well as an analysis of the strategies and goals of monetary policies of the National Bank of Poland (NBP), the Czech National Bank (CzNB), and the National Bank of Hungary (NBH) in the context of existing legal and institutional conditions. In turn, the first empirical part (Section 2) examines how the analysed central banks responded to changes in inflation, unemployment, and economic growth rates. The tools of the analysis are the nominal and real interest rates of those banks. The subsequent research part (Section 3) attempts to evaluate the degree of the contractionary nature of interest rate policies in specific countries in the context of the Taylor rule. The text ends with a summary (Section 4) encompassing concise conclusions drawn from the earlier analyses.

scholarly journals Negative Interest Rate Risk. Atavism or Normalization of Central Banks’ Monetary Policy

2019 ◽  
Vol 3 (342) ◽  
pp. 89-116
Author(s):  
Irena Pyka ◽  
Aleksandra Nocoń
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Central Banks ◽  
Interest Rate Risk ◽  
Interest Rate Policy ◽  
Rate Policy ◽  
Negative Interest Rate Policy

In the face of the global financial crisis, central banks have used unconventional monetary policy instruments. Firstly, they implemented the interest rate policy, lowering base interest rates to a very low (almost zero) level. However, in the following years they did not undertake normalizing activities. The macroeconomic environment required further initiatives. For the first time in history, central banks have adopted Negative Interest Rate Policy (NIRP). The main aim of the study is to explore the risk accompanying the negative interest rate policy, aiming at identifying channels and consequences of its impact on the economy. The study verifies the research hypothesis stating that the risk of negative interest rates, so far unrecognized in Theory of Interest Rate, is a consequence of low effectiveness of monetary policy normalization and may adopt systemic nature, by influencing – through different channels – the financial stability and growth dynamics of the modern world economy.

Implications of Central banks’ negative policy rates on financial stability

2018 ◽  
Vol 10 (2) ◽  
pp. 310-320
Author(s):  
Benjamin S. Kay
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Financial Stability ◽  
Global Economy ◽  
Content Type ◽  
Interest Rate Policy ◽  
Trade Offs ◽  
Negative Interest Rates ◽  
Rate Policy ◽  
Negative Interest Rate Policy

Purpose While central bankers have widely discussed the trade-offs of negative interest rates on monetary policy, the consequences of negative rates on financial stability are less well understood. The purpose of this paper is to examine the likely and possible financial stability consequences of a negative rates policy with particular focus on banks, short-term funding markets, foreign exchange markets, asset managers, pension funds and insurers. Design/methodology/approach It draws from international experience with negative interest rates to identify financial stability threats posed to any economy by negative interest rates, and it also highlights where the US experience is likely to differ. Findings In time, financial market threats and other logistical issues of a negative interest rate policy can be managed or overcome. Even cumulatively, these threats are likely to be small as long as the rates remain only modestly negative. However, if the rates remain negative for long periods or they become more sharply negative, the rewards of avoiding negative rates increase. Originality/value Does the negative interest rate policy directly or through these challenges of implementation present a substantial obstacle to achieving financial stability objectives? As policy rates go negative in a greater share of the global economy, the financial stability consequences remain poorly understood and under discussed.

Negative Interest Rate Policy as Conventional Monetary Policy

2015 ◽  
Vol 234 ◽  
pp. R5-R14 ◽  
Author(s):  
Miles S. Kimball
Keyword(s):  
Economic Theory ◽  
Interest Rate ◽  
Interest Rates ◽  
Real Interest Rate ◽  
Rate Of Return ◽  
Interest Rate Policy ◽  
Paper Currency ◽  
Rate Policy ◽  
Standard Models ◽  
Negative Interest Rate Policy

As long as all interest rates move in tandem – including the rate of return on paper currency – economic theory suggests no important difference between interest rate changes in the positive region and interest rate changes in the negative region. Indeed, in standard models, only the real interest rate and spreads between real interest rates matter. Thus, in most respects, negative interest rate policy is conventional. It is only (a) what needs to be done with paper currency, (b) difficulties in understanding negative rates or (c) institutional features interacting with negative rates that make negative interest rate policy unconventional.

scholarly journals A Simple Model of Interbank Trading with Tiered Remuneration

2020 ◽  
Vol 8 (1) ◽  
pp. 74
Author(s):  
Toshifumi Nakamura
Keyword(s):  
Simple Model ◽  
Interest Rates ◽  
European Central Bank ◽  
Interbank Market ◽  
Interest Rate Policy ◽  
European Central ◽  
Basic Model ◽  
National Bank ◽  
Rate Policy ◽  
Negative Interest Rate Policy

A negative interest rate policy is often accompanied by tiered remuneration, which allows exemption from negative rates. This study proposes a basic model of interest rates in an interbank market with a tiering system. The results largely mirror actual market developments in late 2019, when the European Central Bank introduced the tiering system and the Switzerland National Bank modified it.

scholarly journals Interest Rate Policy, Inflation and Economic Growth: A Policy Evaluation of Indonesia, 1969-1997

2004 ◽  
Vol 6 (3) ◽  
pp. 419 ◽  
Author(s):  
Iswardono Sardjono Permono
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Interest Rates ◽  
Oil And Gas ◽  
Foreign Debt ◽  
Interest Rate Policy ◽  
Dummy Variable ◽  
Rate Policy ◽  
Budget Policy ◽  
The Government

According to Shaw (1973) and McKinnon (1973), the most important element of economic development is financial liberalization. This action will eliminate the distortion, as what the government of Indonesia did on June 1, 1983 through deregulation of banking. The government eliminated the ceiling of credit and gave a full authority to each bank to determine their interest rates. This study looks up to Fry (1995) model to test McKinnon-Shaw hypothesis. The models were regressed with dummy variable. This effort will give illustration or conclusion of the structural change, that happened specifically caused by environmental or policy changes.Generally, insignificant in the relationship between interest rates in national saving and investment in Indonesia could be caused by financial mechanisms those very long and complex channels. That is why real interest rates could not give effect to national saving directly. Export, especially from oil and gas and foreign debt were growth-stimulating factors. Meanwhile, money supply, which supported by tight money policy and balance budget policy caused Indonesian inflation along those periods. The periodically analysis shows that deregulation of June 1983(PAKJUN) were success to mobilize public fund, encourage investment on real sector, and increase the economic growth, but failed to control the inflation rate. The implementation of October 1988 deregulation (PAKTO) had flourished the establishment of new banks and created good competition among them. The competition had no longer on interest rate. Therefore, it can be said also the easy requirements of establishing banks become contra productive for PAKJUN policy, which had laid to the market mechanism.Basically, either PAKJUN or PAKTO was not policies in which urgently implemented in Indonesia. Those financial deregulations were not supported by the existence of deregulation on real sectors, so that the financial deregulations were not effective to achieve their goals.

scholarly journals Scope of Interest Rate Policy of Central Banks

2018 ◽  
Vol 13 (4) ◽  
pp. 42-61 ◽  
Author(s):  
Sergey M. Drobyshevskiy ◽  
◽  
Anna M. Kiyutsevskaya ◽  
Pavel V. Trunin ◽  
◽  
...  
Keyword(s):  
Interest Rate ◽  
Central Banks ◽  
Interest Rate Policy ◽  
Rate Policy

scholarly journals NEUTRAL VALUE OF MONEY IN THE PRACTICE OF MONETARY REGULATION

2021 ◽  
Vol 2021 (11) ◽  
pp. 3-22
Author(s):  
Bohdan DANYLYSHYN ◽  
◽  
Ivan BOGDAN ◽  
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Open Economy ◽  
Methodological Approach ◽  
Small Open Economy ◽  
Central Banks ◽  
Interest Rate Policy ◽  
Advantages And Disadvantages ◽  
Potential Gdp ◽  
Value Of Money

The issue of estimating the level of neutral interest rates is a central issue for theoretical foundation of decision-making on interest rate policy in the practice of central banks. As a result of studying theoretical sources, research materials of international organizations and central banks, the factors of the neutral interest rate are systematized, the methods of its estimation are generalized, their advantages and disadvantages are revealed. Factors of the neutral rate are systematized according to the principle of their influence on the demand or supply of money in the economy. It has been established that there is no single generally accepted theoretical and methodological approach to determining the neutral rate in modern practice. A wide variation of methods with varying degrees of reliance on a theoretical basis (from purely mathematical filtration techniques to complex macroeconomic general equilibrium models) extends a field for new research. It is found that a key issue in neutral rate estimating models is the formalization of the relationship between the effects of external and internal factors, which is especially important for countries with a small open economy. Attention is paid to the method for estimating the neutral rate based on the rule of uncovered interest parity, which is used in the national practice of monetary regulation. Systemic shortcomings of this method are revealed on the basis of research of its theoretical bases and results of practical application in the conditions of the Ukrainian economy. The expediency of introducing into the practice of monetary regulation in Ukraine of alternative methodological toolkit for estimating the neutral rate based on the achievements of T. Laubach and J. Williams with adaptation to the open economy settings is justified, which would enhance the role of domestic factors, in particular changes in potential GDP and savings as important determinants of neutral value of money.

scholarly journals A Structural Measure of the Shadow Federal Funds Rate

2021 ◽  
Vol 2021 (064) ◽  
pp. 1-40
Author(s):  
Callum Jones ◽  
◽  
Mariano Kulish ◽  
James Morley ◽  
◽  
...  
Keyword(s):  
Interest Rate ◽  
Lower Bound ◽  
Interest Rates ◽  
Term Structure ◽  
Structural Model ◽  
Federal Funds ◽  
Federal Funds Rate ◽  
Interest Rate Policy ◽  
Rate Policy ◽  
Structural Measure

We propose a shadow policy interest rate based on an estimated structural model that accounts for the zero lower bound. The lower bound constraint, if expected to bind, is contractionary and increases the shadow rate compared to an unconstrained systematic policy response. By contrast, forward guidance and other unconventional policies that extend the expected duration of zero-interest-rate policy are expansionary and decrease the shadow rate. By quantifying these distinct effects, our structural shadow federal funds rate better captures the stance of monetary policy given economic conditions than a shadow rate based only on the term structure of interest rates.

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