scholarly journals Responses Of Interest Rates In Mexico To U.S. Monetary Policy

2011 ◽  
Vol 19 (2) ◽  
Author(s):  
Yu Hsing
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Arch Model ◽  
Federal Funds Rate ◽  
Stable Relationship ◽  
Long Run ◽  
Regression Parameters ◽  
Time Deposit ◽  
The Cost ◽  
The U.S

<p class="MsoBodyText" style="line-height: normal; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt; mso-bidi-font-style: italic;"><span style="font-family: Times New Roman;">This paper examines potential responses of interest rates in Mexico to the U.S. monetary policy. The regression is cointegrated in that the dependent and independent variables have a long-run stable relationship. The GARCH or ARCH model is applied to estimate regression parameters. The results show that the T-bill rate, the cost of funds rate, and the time-deposit rate in Mexico are significantly affected by the change in the U.S. federal funds rate. In addition, these interest rates are negatively associated with real M2 and real tax revenues and positively affected by the real exchange rate, real government spending, and the expected inflation rate. </span></span></p>

scholarly journals Tight Money And Loose Credit In An Open Economy

2011 ◽  
Vol 5 (4) ◽  
Author(s):  
Michael Cosgrove ◽  
Daniel Marsh
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Open Economy ◽  
Credit Card ◽  
Far East ◽  
Federal Funds Rate ◽  
The Far East ◽  
Time Period ◽  
Bank Reserves ◽  
The U.S

<p class="MsoNormal" style="text-align: justify; margin: 0in 34.2pt 0pt 0.5in;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">The U.S. Federal Reserve has been following a tight money policy, defined by growth in the quantity of money compared to nominal GDP growth since the first quarter of 2004. The Fed has also increased the federal funds rate 17 times in a row by August 8, 2006. Normally, this degree of tightening would be reflected in a slowing of real economic activity by mid-2006, with subsequent lowering of inflation pressures. Yet evidence of a slowdown only materialized in the second quarter of 2006. The housing sector illustrated signs of softening as the inventory numbers started to rise. Are there different factors influencing the effectiveness of monetary policy in this tightening cycle from prior tightening cycles in the Greenspan era? Our thesis is that the linkage between money and credit has become weaker in this cycle. Money appeared to be tight over the relevant time period, while credit was loose. Normally the two move in the same direction &ndash; when monetary policy tightens, credit conditions also tighten. But that didn&rsquo;t occur until very late in the tightening cycle, as credit remained plentiful. Long term interest rates remained low, compared to prior tightening cycles over the cycle. This divergence, in the assessment of the authors, is due to three factors: 1) an increase in monetary base velocity, 2) large net inflows of capital into the U.S., in particular from the Far East &ndash; Japan and China, and 3) the expansion of the markets for securitized assets. Rising incomes and high saving rates in the Far East combined with a relaxation of international capital controls resulted in a flood of savings washing up on America&rsquo;s shores. The securitization of bank-originated assets&mdash;originally home mortgages, but now including auto finance loans and credit card debt&mdash;has loosened the link between bank reserves and the level of credit in the economy.<span style="mso-spacerun: yes;">&nbsp; </span>These factors combined to explain why credit is loose in the U.S. while money appeared tight. A U.S. economy with these characteristics explains in part why the connection between domestic money policy and credit market conditions has been weakened.</span></span></p>

scholarly journals Spillovers of US Conventional and Unconventional Monetary Policies to Russian Financial Markets

2018 ◽  
Vol 10 (2) ◽  
pp. 14 ◽  
Author(s):  
Shigeki Ono
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Interest Rates ◽  
Stock Prices ◽  
Monetary Policy Shocks ◽  
Federal Funds Rate ◽  
Monetary Policies ◽  
Endogenous Variables ◽  
Policy Shocks ◽  
Monetary Policy Shock

This paper investigates the spillovers of US conventional and unconventional monetary policies to Russian financial markets using VAR-X models. Impulse responses to an exogenous Federal Funds rate shock are assessed for all the endogenous variables. The empirical results show that both conventional and unconventional tightening monetary policy shocks decrease stock prices whereas an easing monetary policy shock does not increase stock prices. Moreover, the results suggest that an unconventional tightening monetary policy shock increases Russian interest rates and decreases oil prices, implying reduced liquidity in international financial markets.

scholarly journals Causes of The Outbreak of the Eurozone Crises: The Role of the Usa and the European Central Bank Monetary Policy

e-Finanse ◽  
2015 ◽  
Vol 11 (2) ◽  
pp. 47-63
Author(s):  
Natalia Białek
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
European Central Bank ◽  
Institutional Design ◽  
Global Financial Crisis ◽  
European Central ◽  
Low Interest Rates ◽  
The Usa ◽  
The U.S

Abstract This paper argues that the loose monetary policy of two of the world’s most important financial institutions-the U.S. Federal Reserve Board and the European Central Bank-were ultimately responsible for the outburst of global financial crisis of 2008-09. Unusually low interest rates in 2001- 05 compelled investors to engage in high risk endeavors. It also encouraged some governments to finance excessive domestic consumption with foreign loans. Emerging financial bubbles burst first in mortgage markets in the U.S. and subsequently spread to other countries. The paper also reviews other causes of the crisis as discussed in literature. Some of them relate directly to weaknesses inherent in the institutional design of the European Monetary Union (EMU) while others are unique to members of the EMU. It is rather striking that recommended remedies tend not to take into account the policies of the European Central Bank.

Symmetric and asymmetric adjustment of bank deposit interest rates: empirical evidence from Kenya

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moses Nzuki Nyangu ◽  
Freshia Wangari Waweru ◽  
Nyankomo Marwa
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Asymmetric Adjustment ◽  
Deposit Rate ◽  
Content Type ◽  
Long Run ◽  
Adjustment Speed ◽  
Short Run ◽  
Pass Through

PurposeThis paper examines the sluggish adjustment of deposit interest rate categories with response to policy rate changes in a developing economy.Design/methodology/approachSymmetric and asymmetric error correction models (ECMs) are employed to test the pass-through effect and adjustment speed of deposit rates when above or below their equilibrium levels.FindingsThe findings reveal an incomplete pass-through effect in both the short run and long run while mixed results of symmetric and asymmetric adjustment speed across the different deposit rate categories are observed. Collusive pricing arrangement behavior is supported by deposit rate categories that adjust more rigidly upwards than downwards, while negative customer reaction behavior is supported by deposit rate categories that adjust more rigidly downwards than upwards.Practical implicationsEven though the findings indicate an aspect of increased responsiveness over the period, the sluggish adjustment of deposit rates imply that monetary policy is still ineffective and not uniform across the different deposit rate categories.Originality/valueTo the best of the authors' knowledge, this is the first study to empirically examine both symmetric and asymmetric adjustment behavior of deposit interest rate categories in Kenya. The findings are key to policy makers as they provide insights on how long it takes to adjust different deposit rate categories to monetary policy decisions. In addition, the behavior of deposit rates partly explains why interest rates capping was imposed in Kenya in 2016.

The Link between German Short- and Long-Term Interest Rates. Some Evidence against a Term Structure Oriented Monetary Policy / Der Zusammenhang zwischen kurz- und langfristigen Zinssätzen in Deutschland. Empirische Evidenz gegen eine zinsstrukturorientierte Geldpolitik

1998 ◽  
Vol 217 (2) ◽  
Author(s):  
Uwe Hassler ◽  
Dieter Nautz
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Term Structure ◽  
Monetary Union ◽  
Stable Relationship ◽  
Monetary Targeting ◽  
Main Indicator ◽  
Short And Long Term

SummaryCritics of the Bundesbank's monetary policy recently suggested the abandonment of monetary targeting in favour of the term structure of interest rates as the main indicator of central bank policy. However, a term structure oriented policy requires a reliable link between short- and long-term interest rates. Our analysis clearly suggests that there is no stable relationship between German short- and long-term interest rates, in particular not after the German monetary union. Consequently, the empirical results of this paper indicate that this policy has not much chance of success.

scholarly journals Deleveraging and Monetary Policy: Japan Since the 1990s and the United States Since 2007

2012 ◽  
Vol 26 (3) ◽  
pp. 177-202 ◽  
Author(s):  
Kazuo Ueda
Keyword(s):  
United States ◽  
Monetary Policy ◽  
Great Recession ◽  
Federal Reserve ◽  
The United States ◽  
Federal Funds ◽  
Federal Funds Rate ◽  
The Great Recession ◽  
Policy Responses ◽  
The U.S

As the U.S. economy works through a sluggish recovery several years after the Great Recession technically came to an end in June 2009, it can only look with horror toward Japan's experience of two decades of stagnant growth since the early 1990s. In contrast to Japan, U.S. policy authorities responded to the financial crisis since 2007 more quickly. Surely, they learned from Japan's experience. I will begin by describing how Japan's economic situation unfolded in the early 1990s and offering some comparisons with how the Great Recession unfolded in the U.S. economy. I then turn to the Bank of Japan's policy responses to the crisis and again offer some comparisons to the Federal Reserve. I will discuss the use of both the conventional interest rate tool—the federal funds rate in the United States, and the “call rate” in Japan—and nonconventional measures of monetary policy and consider their effectiveness in the context of the rest of the financial system.

scholarly journals Analysis of the Viability of Fiscal and Monetary Policies on the Recovery of Household Consumption Expenditures Because of the Covid-19 Pandemic

2021 ◽  
Vol 3 (1) ◽  
Author(s):  
Fahrul Riza ◽  
William Wiriyanata
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Government Spending ◽  
Positive Impact ◽  
Household Consumption ◽  
Series Data ◽  
Consumption Expenditure ◽  
Consumption Expenditures ◽  
Long Run ◽  
The Government

The Covid-19 outbreak disrupted economic activity in almost all countries. The Indonesian economy entered a recession phase as a result of the continued contraction in economic growth in the second and third quarters of 2020. According to Keynesian economic theory, the combination of fiscal policy and monetary policy was more effective in recovering the economy from the crisis, this study aims to measure the effect of government spending, money supply, inflation and interest rates on aggregate household consumption expenditure. This study used a quantitative method, using monthly time series data from January 2015 to December 2020. The data were analyzed using the Vector Error Correction Model (VECM). The results show that government spending has a negative impact on household aggregate expenditure in the long run meanwhile interest rate has a positive impact on household consumption expenditure. Inflation do not affect aggregate household consumption expenditure, both in the short and long term. The results of the analysis are useful for evaluating the policies taken by the government to overcome the economic crisis due to the spread of the Covid-19 outbreak. The government increases aggregate expenditure to cover the decline in household aggregate consumption expenditure due to a decrease in household real income. Then expansionary monetary policy in the long run will increase aggregate demand. Therefore, the Ministry of Finance together with Bank Indonesia needs to design other policies that will have a positive impact on economic recovery in the short term. This study has not included other macro indicators that affect household consumption expenditures such as unemployment, taxes and the household marginal propensity to saving (MPS). Keywords: Household Aggregate Expenditure; Government Expenditure; Inflation; VECM

scholarly journals Cyclical Fluctuation, Growth, and Stabilization: An Empirical Investigation of Dual Policy Objectives in Bangladesh

2020 ◽  
Author(s):  
Richmond Sam Quarm ◽  
Mohamed Osman Elamin Busharads
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Business Cycle ◽  
Interest Rates ◽  
Money Supply ◽  
Macroeconomic Policy ◽  
Output Growth ◽  
Long Run ◽  
Short Run ◽  
The Business Cycle

In conventional economics, two types of macroeconomic policy i.e. fiscal policy and monetary policy are used to streamline the business cycle. This paper has examined the cyclical behavior of these variables over the business cycle of Bangladesh. The objective of this examination is to show whether policies (fiscal policy and monetary policy) in Bangladesh are taken with a motive to stabilize the economy or only to promote economic growth. In other words, it has examined whether the policies in Bangladesh are procyclical or countercyclical or acyclical. Hodrick Prescott (HP) filter has been used to separate the cyclical component of considered variables. Both correlation and regression-based analysis have provided that in Bangladesh government expenditure and interest rates behave procyclically, but money supply behaves acyclically over the business cycle. Besides, this paper has tried to identify the long-term as well as the short-term relationship between real GDP and the macroeconomic policy variables with the help of the Johansen cointegration test, vector error correction model (VECM), and block exogeneity Wald test. Through these analyses, this study has found that fiscal policy has a significant impact on GDP growth both in the short-run and long-run. In the case of monetary policy, although the interest rate has an impact on real output both in the short-run and long-run, the money supply has neither a short-run nor long-run effect on output growth.

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