scholarly journals Joint Dynamics Of The U.S. Treasury Maturity Rates: Policy Implications For Central Banks

2011 ◽  
Vol 9 (5) ◽  
pp. 1
Author(s):  
Omid Sabbaghi
Keyword(s):  
Central Bank ◽  
Interest Rates ◽  
Multivariate Time Series ◽  
Policy Implications ◽  
Impulse Responses ◽  
Short Term ◽  
Treasury Market ◽  
Short Horizon ◽  
The U.S

This paper examines whether there is a direct relationship between yields of differing maturities for the U.S. Treasury market. The hypothesis that long horizon rates may help to predict future short horizon rates, in addition to short horizon rates helping to predict future long horizon rates, provides the motivation for the present study. The proposed inter-relationship between the different interest rates exhibits important implications for central bank policy-making. Employing a multivariate time-series analysis, we find that spreads in the short-term rate tend to rise (fall) in response to rises in prior short-term (long-term) rate spreads. Additionally, spreads in the long term rates tend to decrease in response to prior rises in the 1 year Treasury rate spread. Finally, positive impulse responses for long term spreads largely derive from shocks to shorter term maturity spreads, while shocks to longer term maturity rates result in gradual negative impulse responses for maturity rates of shorter horizons. In sum, this paper provides evidence of important feedback relationships across the maturity spectrum in the U.S. Treasury market. An understanding of the maturity rate dynamics is crucial for future central bank interventions and for the pricing of options and other related financial instruments.

scholarly journals Journal of the History of Economic Thought Preprints - Limits to Arbitrage and Interest Rates: A Debate Between Keynes, Hawtrey and Hicks

2018 ◽  
Author(s):  
Lucy BRILLANT
Keyword(s):  
Business Cycle ◽  
Central Bank ◽  
Interest Rates ◽  
Economic Thought ◽  
History Of Economic Thought ◽  
Short Term ◽  
Limits To Arbitrage ◽  
History Of ◽  
The Business Cycle

This paper deals with a debate between Hawtrey, Hicks and Keynes concerning the capacity of the central bank to influence the short-term and the long-term rates of interest. Both Hawtrey and Keynes considered the central bank’s ability to influence short-term rates of interest. However, they do not put the same emphasis on the study of the long-term rates of interest. According to Keynes, long-term rates are influenced by future expected short-term rates (1930, 1936), whereas for Hawtrey (1932, 1937, 1938), long-term rates are more dependent on the business cycle. Short-term rates do not have much effect on long-term rates according to Hawtrey. In 1939, Hicks enters the controversy, giving credit to both Hawtrey’s and Keynes’s theories, and also introducing limits to the operations of arbitrage. He thus presented a nuanced view.

LIMITS TO ARBITRAGE AND INTEREST RATES: A DEBATE AMONG KEYNES, HAWTREY, AND HICKS

2018 ◽  
Vol 40 (3) ◽  
pp. 335-351 ◽  
Author(s):  
Lucy Brillant
Keyword(s):  
Business Cycle ◽  
Central Bank ◽  
Interest Rates ◽  
Short Term ◽  
John Maynard Keynes ◽  
Limits To Arbitrage ◽  
The Business Cycle

This paper deals with a debate among Ralph George Hawtrey, John Richard Hicks, and John Maynard Keynes concerning the capacity of the central bank to influence the short-term and the long-term rates of interest. Both Hawtrey and Keynes considered the central bank’s ability to influence short-term rates of interest. However, they do not put the same emphasis on the study of the long-term rates of interest. According to Keynes, long-term rates are influenced by future expected short-term rates (1930, 1936), whereas for Hawtrey ([1932] 1962, 1937, 1938), long-term rates are more dependent on the business cycle. Short-term rates do not have much effect on long-term rates, according to Hawtrey. In 1939, Hicks enters the controversy, giving credit to both Hawtrey’s and Keynes’s theories, and also introducing limits to the operations of arbitrage. He thus presented a nuanced view.

scholarly journals An empirical analysis of long-term Brazilian interest rates

PLoS ONE ◽  
2021 ◽  
Vol 16 (9) ◽  
pp. e0257313
Author(s):  
Tanweer Akram ◽  
Syed Al-Helal Uddin
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Policy Implications ◽  
Government Bond ◽  
Short Term ◽  
Monetary Policies ◽  
Government Bonds ◽  
Macroeconomic Variables ◽  
Brazilian Government

This paper empirically models the dynamics of Brazilian government bond (BGB) yields based on monthly macroeconomic data, in the context of the evolution of the key macroeconomic variables in Brazil. The results show that the current short-term interest rate has a decisive influence on the long-term interest rate on BGBs, after controlling for various key macroeconomic variables, such as inflation and industrial production. These findings support John Maynard Keynes’s claim that the central bank’s actions influence the long-term interest rate on government bonds mainly through the current short-term interest rate. These findings have important policy implications for Brazil. This paper relates the findings of the estimated models to ongoing debates in fiscal and monetary policies.

scholarly journals A VAR Analysis Of US-China Economic Linkages

2011 ◽  
Vol 8 (7) ◽  
Author(s):  
Dene T. Hurley
Keyword(s):  
Interest Rates ◽  
Impulse Response ◽  
Significant Role ◽  
Variance Decomposition ◽  
Short Term ◽  
Treasury Bill ◽  
Treasury Securities ◽  
Var Analysis ◽  
The U.S

An increase in Chinese purchases of U.S. treasury securities in parallel with Chinas commitment to maintain the value of the Yuan have been blamed in recent years for the divergence of the U.S. long-term and short-term interest rates. Results of the VECM, variance decomposition and impulse response analyses provided support for the growing speculations that growing Chinese demand for U.S. securities played a significant role in keeping the 10-year Treasury bill rate low while keeping the Yuan weak relative to the U.S. dollar. As for the U.S. long-term and short-term interest rates, the causality was found to run from the 10-year Treasury bill yield to the s rate which helps to explain why rising short-term rate in the U.S. since mid-2004 had little or no impact on the long-term rate.

scholarly journals Quantitative Easing and the U.S. Stock Market: A Decision Tree Analysis

2016 ◽  
Vol 7 (2) ◽  
pp. 135-156
Author(s):  
Ramaprasad Bhar ◽  
A.G. Malliaris ◽  
Mary Malliaris
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Interest Rates ◽  
Federal Reserve ◽  
Quantitative Easing ◽  
Short Term ◽  
Federal Funds ◽  
Monetary Policies ◽  
The U.S

The Financial Crisis of 2007-09 caused the U.S. economy to experience a relatively long recession from December 2007 to June 2009. Both the U.S. government and the Federal Reserve undertook expansive fiscal and monetary policies to minimize both the severity and length of the recession.  Most notably, the Federal Reserve initiated three rounds of unconventional monetary policies known as Quantitative Easing.  These policies were intended to reduce long-term interest rates when the short term federal funds rates had reached the zero lower bound and could not become negative. It was argued that the lowering of longer-term interest rates would help the stock market and thus the wealth of consumers.  This paper investigates this hypothesis and concludes that quantitative easing has contributed to the observed increases in the stock market’s significant recovery since its crash due to the financial crisis

scholarly journals Adding Structure to Statistics: A Study on COVID-19 Dynamics in India

2020 ◽  
Author(s):  
Arundhati Dixit ◽  
Sarthak Vishnoi ◽  
Sourabh Bikas Paul
Keyword(s):  
Fixed Effects ◽  
Policy Implications ◽  
Effect Of Temperature ◽  
Structural Vector Autoregression ◽  
Fixed Effects Model ◽  
Impulse Responses ◽  
Short Term ◽  
Compartmental Modelling ◽  
Structural Vector

This study pertains to COVID-19 in India, and begins by uncovering the statistical relationship between three time series-number of cases, number of deaths, and number of tests each day, using structural vector autoregression. Further, impulse responses of the before-mentioned series are studied. Effect of temperature and humidity on number of cases is analysed using the fixed effects model on city-level panel data. The next model utilises exponential smoothing for forecasting and conjecture for identifying peak specific to this data is presented. Lastly, multiple iterations of compartmental modelling, possible scenarios, and effect of underlying assumptions is analysed. The models are used to forecast number of cases (regression for short term and epidemiological for long term). In the end, policy implications of different modelling exercises and ways to check the implication for policy planning are discussed.

scholarly journals CANDIDE et la monnaie

2009 ◽  
Vol 52 (1) ◽  
pp. 75-103
Author(s):  
Jean-Pierre Aubry ◽  
Pierre Duguay
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Term Structure ◽  
Structural Equations ◽  
Reduced Form ◽  
Real Sector ◽  
Short Term ◽  
The Real ◽  
Structure Equations

Abstract In this paper we deal with the financial sector of CANDIDE 1.1. We are concerned with the determination of the short-term interest rate, the term structure equations, and the channels through which monetary policy influences the real sector. The short-term rate is determined by a straightforward application of Keynesian liquidity preference theory. A serious problem arises from the directly estimated reduced form equation, which implies that the demand for high powered money, but not the demand for actual deposits, is a stable function of income and interest rates. The structural equations imply the opposite. In the term structure equations, allowance is made for the smaller variance of the long-term rates, but insufficient explanation is given for their sharper upward trend. This leads to an overstatement of the significance of the U.S. long-term rate that must perform the explanatory role. Moreover a strong structural hierarchy, by which the long Canada rate wags the industrial rate, is imposed without prior testing. In CANDIDE two channels of monetary influence are recognized: the costs of capital and the availability of credit. They affect the business fixed investment and housing sectors. The potential of the personal consumption sector is not recognized, the wealth and real balance effects are bypassed, the credit availability proxy is incorrect, the interest rate used in the real sector is nominal rather than real, and the specification of the housing sector is dubious.

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