scholarly journals Does High Yield Spread Dampen Economic Growth?

2014 ◽  
Vol 3 (2) ◽  
pp. 01-09
Author(s):  
Yutaka Kurihara
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Interest Rates ◽  
Empirical Relationship ◽  
Negative Relationship ◽  
The United States ◽  
Output Growth ◽  
Yield Spread ◽  
Government Bond ◽  
Bond Yield

This article focuses on the empirical relationship between the United States’ and Japan’s yield spread of interest rates and economic growth in Japan. The yield spread is defined in this article as the difference between the Japanese government bond yield minus the US government bond yield. Some studies have tackled this issue and found a negative relationship between the yield spread and economic growth; however, recent studies have shown no or a weak relationship. This problem has not yet reached consensus in spite of its importance. As the Japanese interest rate has been quite low since the adoption of the zero interest rate policy at the end of 1990s, the situation may change the results. The empirical results show that reliability of yield spread as a leading indicator of output growth exists in Japan; however, term structure of interest rate is not related to output growth.

scholarly journals Does High Yield Spread Dampen Economic Growth? The Case of US-Japan

2016 ◽  
Vol 3 (2) ◽  
pp. 1
Author(s):  
Yutaka Kurihara
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Interest Rates ◽  
Empirical Relationship ◽  
Negative Relationship ◽  
The United States ◽  
Output Growth ◽  
Yield Spread ◽  
Government Bond ◽  
Bond Yield

<p><em>This article focuses on the empirical relationship between the United States’ and Japan’s yield spread of interest rates and economic growth in Japan. The yield spread is defined in this article as the difference between the Japanese government bond yield minus the US government bond yield. Some studies have tackled this issue and found a negative relationship between the yield spread and economic growth; however, recent studies have shown no or a weak relationship. This problem has not yet reached consensus in spite of its importance. As the Japanese interest rate has been quite low since the adoption of the zero interest rate policy at the end of 1990s, the situation may change the results. The empirical results show that reliability of yield spread as a leading indicator of output growth exists in Japan; however, term structure of interest rate is not related to output growth.</em><em></em></p>

scholarly journals Effect of macroeconomic variables on systemic risk: Evidence from Vietnamese economy

2021 ◽  
Vol 10 (3) ◽  
pp. 217-228
Author(s):  
Thi Xuan Huong Tram ◽  
Nguyen Thi Thanh Hoai
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Systemic Risk ◽  
Fixed Effects ◽  
Positive Impact ◽  
Generalized Method Of Moments ◽  
Negative Relationship ◽  
Ordinary Least Squares

This paper aims to find out the relationship between systemic risk in Vietnam and the effects of macroeconomic factors, including exchange rate, interest rates, and economic growth. We collect data from the Vietnamese stock market, specifically 29 listed financial firms (banks, insurance companies, and securities firms) for the period 2010-2018. The analysis is performed in two steps including systematic risk measurement in Vietnam based on the Systemic Expected Shortfall (SES) method and providing evidence from analysis related to the risk determinants assessment. Besides ordinary least squares (OLS) methods, we make use of fixed-effects (FEM) estimations, random-effects (REM) estimations, and system generalized method of moments (SGMM). The empirical evidence in this paper indicates that economic growth has a negative relationship on systemic risk in Vietnam while the exchange rate has a positive impact on systemic risk, and the interest rate has a negative relationship on systemic risk in Vietnam. Future studies can address the effects of interest rate on systemic risk during this period.

Long-Term Interest Rates: The Role of Expected Budget Deficits

1988 ◽  
Vol 16 (3) ◽  
pp. 341-356 ◽  
Author(s):  
Lloyd B. Thomas ◽  
Ali Abderrezak
Keyword(s):  
Interest Rates ◽  
Output Growth ◽  
Reduced Form ◽  
Government Bond ◽  
Budget Deficits ◽  
Bond Yields ◽  
Expected Inflation ◽  
Bond Yield ◽  
Deficit Reduction ◽  
Alternative Measures

A relatively simple loanable funds model is utilized to explain the 10-year government bond yield during 1970–86. In the reduced form equation, expected inflation, expected structural deficits as a percentage of GNP, output growth, and liquidity growth appear as exogenous variables. Using alternative measures of expected inflation and expected deficits, the regression results indicate a powerful effect of expected deficits on the 10-year government bond yield. The increase in expected deficits raised bond yields by some 180 basis points by early 1984, and the anticipation of deficit-reduction legislation accounts for about one-third of the decline in yields during 1985–86, according to the model. In alternative experiments, tests are conducted to see whether bond yields “Granger-cause” forthcoming deficits. Our findings are consistent with the view that agents are forward-looking and foresee the direction of major changes in structural deficits.

The relationship between output growth and unemployment in the Philippines economy (1990-2014):

2017 ◽  
Vol 5 (1) ◽  
pp. 49
Author(s):  
Marlon A. Mojica ◽  
Virgilio M. Tatlonghari
Keyword(s):  
Labor Force ◽  
Structural Break ◽  
Empirical Relationship ◽  
Trade Openness ◽  
Negative Relationship ◽  
Participation Rate ◽  
The Philippines ◽  
Output Growth ◽  
Recursive Least Squares ◽  
Parameter Instability

This paper examines the empirical relationship between unemployment and real output in the Philippines utilizing quarterly data from the Labor Force Survey by the Philippine Statistics Authority for the period from 1990-2014. The study employed three variants of Okun’s Law – the “gap” approach, the “first difference” approach, and a dynamic approach.   Findings show that the Okun’s coefficients based on the gap approach are consistent with the theoretical expectation of a negative relationship.  In the ARDL model, labor force participation rate and trade openness were found to be significantly related to unemployment. The result of dummy variable test revealed the presence of structural break following the re-definition of unemployment in the Philippines in 2005. Recursive least squares and rolling regressions show evidence of parameter instability in several sub-periods.

An Empirical Bargaining Model with Left-Digit Bias: A Study on Auto Loan Monthly Payments

2021 ◽  
Author(s):  
Zhenling Jiang
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Large Data ◽  
The United States ◽  
Nash Bargaining ◽  
Bargaining Model ◽  
Data Set ◽  
Proposed Model ◽  
Lower Interest Rate ◽  
The Empirical Analysis

This paper studies price bargaining when both parties have left-digit bias when processing numbers. The empirical analysis focuses on the auto finance market in the United States, using a large data set of 35 million auto loans. Incorporating left-digit bias in bargaining is motivated by several intriguing observations. The scheduled monthly payments of auto loans bunch at both $9- and $0-ending digits, especially over $100 marks. In addition, $9-ending loans carry a higher interest rate, and $0-ending loans have a lower interest rate. We develop a Nash bargaining model that allows for left-digit bias from both consumers and finance managers of auto dealers. Results suggest that both parties are subject to this basic human bias: the perceived difference between $9- and the next $0-ending payments is larger than $1, especially between $99- and $00-ending payments. The proposed model can explain the phenomena of payments bunching and differential interest rates for loans with different ending digits. We use counterfactuals to show a nuanced impact of left-digit bias, which can both increase and decrease the payments. Overall, bias from both sides leads to a $33 increase in average payment per loan compared with a benchmark case with no bias. This paper was accepted by Matthew Shum, marketing.

Relationship between Budget Deficit and Economic Growth: Evidence from Ethiopia

2021 ◽  
Vol 2 (2) ◽  
pp. 10-15
Author(s):  
Desalegn Emana
Keyword(s):  
Economic Growth ◽  
Interest Rates ◽  
Budget Deficit ◽  
Time Series Data ◽  
Negative Impact ◽  
Positive Impact ◽  
Negative Relationship ◽  
Nominal Exchange Rate ◽  
Series Data ◽  
Long Run

This study examined the relationship between budget deficit and economic growth in Ethiopia using time series data for the period 1991 to 2019 by applying the ARDL bounds testing approach. The empirical results indicate that budget deficit and economic growth in Ethiopia have a negative relationship in the long run, and have a weak positive association in the short run. In line with this, in the long run, a one percent increase in the budget deficit causes a 1.43 percent decline in the economic growth of the country. This result is consistent with the neoclassical view which says budget deficits are bad for economic growth during stimulating periods. Moreover, in the long run, the variables trade openness and inflation have a positive impact on Ethiopian economic growth, and on the other hand, the economic growth of Ethiopia is negatively affected by the nominal exchange rate in the long run. Apart from this, in the long run, gross capital formation and lending interest rates have no significant impact on the economic growth of the country. Therefore, the study recommends the government should manage its expenditure and mobilize the resources to generate more revenue to address the negative impact of the budget deficit on economic growth.

scholarly journals Global Outlook for 2018: Economy, Finance, and Monetary, with a Particular Case Study of Taiwan

2018 ◽  
Vol 10 (3) ◽  
pp. 133 ◽  
Author(s):  
Shyi-Min Lu
Keyword(s):  
Economic Growth ◽  
Economic Development ◽  
Interest Rates ◽  
Global Economy ◽  
Average Rate ◽  
The United States ◽  
Gdp Growth ◽  
Advanced Economies ◽  
Global Economic Growth

In October 2017, IMF President Christine Lagarde declared that the GDP growth of world’s economies in the first half of 2017 was up to the broadest recovery since 2010. So far, the strength of global economic growth has been enhancing. The interest rates and inflation are still at a low level. The global economy has risen from the bottom in 2016 to reach its peak since 2011. As for the degree of economic development, the emerging markets grew fastest, followed by the developing countries, while the advanced economies grew moderately at an average rate around 2%. Manufacturing PMI in major countries, such as the United States, China, the Eurozone, and even Taiwan, have increased above 50 notably in the recent years, while the non-manufacturing PMI is also above 50. Accordingly, the main purpose of this paper is to forecast the global economy in 2018, which is on the trajectory of booming with a certain degree of uncertainty. A particular case study of Taiwan’s overall economic development is presented as well.

scholarly journals The Long-Run Determinants of Indian Government Bond Yields

2019 ◽  
Vol 36 (1) ◽  
pp. 168-205 ◽  
Author(s):  
Tanweer Akram ◽  
Anupam Das
Keyword(s):  
Interest Rate ◽  
Government Bond ◽  
Bond Yields ◽  
Short Term ◽  
Indian Government ◽  
Bond Yield ◽  
Long Run ◽  
Key Driver ◽  
The Government

This paper investigates the long-term determinants of the nominal yields of Indian government bonds (IGBs). It examines whether John Maynard Keynes’ supposition that the short-term interest rate is the key driver of the long-term government bond yield holds over the long run, after controlling for key economic factors. It also appraises if the government fiscal variable has an adverse effect on government bond yields over the long run. The models estimated in this paper show that in India the short-term interest rate is the key driver of the long-term government bond yield over the long run. However, the government debt ratio does not have any discernible adverse effect on IGB yields over the long run. These findings will help policy makers to (i) use information on the current trend of the short-term interest rate and other key macro variables to form their long-term outlook about IGB yields, and (ii) understand the policy implications of the government's fiscal stance.

Oil Prices and the Global Economy

2016 ◽  
Vol 16 (210) ◽  
Author(s):  
Kamiar Mohaddes ◽  
M. Pesaran
Keyword(s):  
Interest Rates ◽  
Global Economy ◽  
Negative Relationship ◽  
Oil Prices ◽  
The United States ◽  
Equity Prices ◽  
Demand And Supply ◽  
Time Period ◽  
Oil Markets ◽  
The 2008 Financial Crisis

The recent plunge in oil prices has brought into question the generally accepted view that lower oil prices are good for the United States and the global economy. In this paper, using a quarterly multi-country econometric model, we first show that a fall in oil prices tends relatively quickly to lower interest rates and inflation in most countries, and increase global real equity prices. The effects on real output are positive, although they take longer to materialize (around four quarters after the shock). We then re-examine the effects of low oil prices on the U.S. economy over different sub-periods using monthly observations on real oil prices, real equity prices and real dividends. We confirm the perverse positive relationship between oil and equity prices over the period since the 2008 financial crisis highlighted in the recent literature, but show that this relationship has been unstable when considered over the longer time period of 1946–2016. In contrast, we find a stable negative relationship between oil prices and real dividends which we argue is a better proxy for economic activity (as compared to equity prices). On the supply side, the effects of lower oil prices differ widely across the different oil producers, and could be perverse initially, as some of the major oil producers try to compensate their loss of revenues by raising production. Taking demand and supply adjustments to oil price changes as a whole, we conclude that oil markets equilibrate but rather slowly, with large episodic swings between low and high oil prices.

scholarly journals Was the New Deal Contractionary?

2012 ◽  
Vol 102 (1) ◽  
pp. 524-555 ◽  
Author(s):  
Gauti B Eggertsson
Keyword(s):  
United States ◽  
Interest Rate ◽  
Interest Rates ◽  
New Deal ◽  
The United States ◽  
Government Policies ◽  
Short Term ◽  
The Great Depression ◽  
Zero Bound ◽  
The New Deal

Can government policies that increase the monopoly power of firms and the militancy of unions increase output? This paper shows that the answer is yes under certain “emergency” conditions. These emergency conditions—zero interest rates and deflation—were satisfied during the Great Depression in the United States. The New Deal, which facilitated monopolies and union militancy, was therefore expansionary in the model presented. This conclusion is contrary to a large previous literature. The main reason for this divergence is that this paper incorporates rigid prices and the zero bound on the short-term interest rate. JEL: E23, E32, E52, E62, J51, N12, N42

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