scholarly journals The Effect of Monetary Policy on Short-Term Interest Rates

1988 ◽  
Vol 70 ◽  
Author(s):  
Daniel L. Thornton
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Short Term ◽  
Effect Of Monetary Policy

scholarly journals Household Debt and Monetary Policy: Revealing the Cash-Flow Channel*

2020 ◽  
Author(s):  
Martin Flodén ◽  
Matilda Kilström ◽  
Jósef Sigurdsson ◽  
Roine Vestman
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Cash Flow ◽  
Short Term ◽  
Balance Sheets ◽  
Household Spending ◽  
Percentage Point Increase ◽  
Policy Shocks ◽  
Adjustable Rate ◽  
Effect Of Monetary Policy

Abstract We examine the effect of monetary policy on household spending when households are indebted and interest rates on outstanding loans are linked to short-term interest rates. Using administrative data on balance sheets and consumption expenditure of Swedish households, we reveal the cash-flow transmission channel of monetary policy. On average, indebted households reduce consumption spending by an additional 0.23–0.55 percentage points in response to a one-percentage-point increase in the policy rate, relative to a household with no debt. We show that these responses are driven by households that have some or a large share of their debt in contracts where interest rates vary with short-term interest rates, such as adjustable-rate mortgages (ARMs), which implies that monetary policy shocks are quickly passed through to interest expenses.

Perspectives on inflation Targeting Regime in Russia

2014 ◽  
pp. 107-121 ◽  
Author(s):  
S. Andryushin
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Short Term ◽  
Indirect Control ◽  
Financial Account ◽  
Domestic Prices ◽  
Macroeconomic Indicators ◽  
Private And Public

The paper analyzes monetary policy of the Bank of Russia from 2008 to 2014. It presents the dynamics of macroeconomic indicators testifying to inability of the Bank of Russia to transit to inflation targeting regime. It is shown that the presence of short-term interest rates in the top borders of the percentage corridor does not allow to consider the key rate as a basic tool of monetary policy. The article justifies that stability of domestic prices is impossible with-out exchange rate stability. It is proved that to decrease excessive volatility on national consumer and financial markets it is reasonable to apply a policy of managing financial account, actively using for this purpose direct and indirect control tools for the cross-border flows of the private and public capital.

scholarly journals Measuring the Effect of the Zero Lower Bound on Medium- and Longer-Term Interest Rates

2014 ◽  
Vol 104 (10) ◽  
pp. 3154-3185 ◽  
Author(s):  
Eric T. Swanson ◽  
John C. Williams
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Lower Bound ◽  
Private Sector ◽  
Interest Rates ◽  
Zero Lower Bound ◽  
Short Term ◽  
Macroeconomic Models ◽  
Monetary And Fiscal Policy ◽  
Effectiveness Of Monetary Policy

According to standard macroeconomic models, the zero lower bound greatly reduces the effectiveness of monetary policy and increases the efficacy of fiscal policy. However, private-sector decisions depend on the entire path of expected future short-term interest rates, not just the current short-term rate. Put differently, longer-term yields matter. We show how to measure the zero bound's effects on yields of any maturity. Indeed, 1- and 2-year Treasury yields were surprisingly unconstrained throughout 2008 to 2010, suggesting that monetary and fiscal policy were about as effective as usual during this period. Only beginning in late 2011 did these yields become more constrained. (JEL E43, E52, E62)

scholarly journals Effectiveness of Monetary Policy Instruments on Economic Growth in Jordan Using Vector Error Correction Model

2017 ◽  
Vol 9 (11) ◽  
pp. 194
Author(s):  
Rami Obeid ◽  
Bassam Awad
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Policy Instruments ◽  
Short Term ◽  
Correction Model ◽  
Vector Error Correction ◽  
Real Gdp ◽  
Vector Error ◽  
Effect Of Monetary Policy

The global financial crisis emphasized the important role of the prudent monetary policy in supporting economic growth through maintaining price stability. The monetary policy operational framework that was designed in 2008 was updated to include more instruments for managing monetary policy learning from the crisis lessons. Several studies analyzed various dimensions related to economic growth in Jordan such as Abdul-Khaliq, Soufan, and Abu Shihab (2013) and Assaf (2014), there were no studies that investigated the effect of monetary policy on economic growth in Jordan, at least recently, however. The study aims at measuring the effect of monetary policy instruments on the performance of Jordanian economy. Using quarterly data covering the period (2005-2015), an econometric model was examined using Vector Error Correction Model to assess the impact of monetary policy instruments on economic growth. The foremost advantage of VECM is that it has a nice interpretation of long-term and short-term equations. The results showed the existence of positive long-term and short-term effects of monetary policy instruments on the growth of real GDP. The model included three monetary policy instruments besides money supply. They are required reserve ratio, rediscount rate and overnight interbank loan rates as independent variables, and the real GDP growth as a dependent variable. The stationarity of the model time series was addressed. In addition, the stability of the model was tested using stability diagnostics tools. The results showed also an existence of inverse relationship between rediscount rate and economic growth in Jordan over both long and short terms.

scholarly journals Sustainable Approach to the Normalization Process of the UK’s Monetary Policy

2020 ◽  
Vol 12 (21) ◽  
pp. 9229
Author(s):  
Aleksandra Nocoń
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Global Financial Crisis ◽  
Synthesis Method ◽  
Balance Sheet ◽  
Central Banks ◽  
Short Term ◽  
Effect Analysis ◽  
Short Term Prediction ◽  
Normalization Process

It has been more than a decade since central banks, in the face of the global financial crisis, implemented a set of unconventional initiatives that included a rapid and significant decrease in their main interest rates and an unprecedented balance sheet policy. Thus far, they still have not returned their monetary policy to the pre-crisis framework and have not implemented a normalization process. Currently, a trend of using econometric models in monetary policy for forecasting purposes has been observed. Among these models, Bayesian vector autoregression models (BVAR models) are increasingly being used by central banks. The main aim of this study was to conduct an empirical verification of the BVAR model’s usage for short-term prediction which could then be used for a sustainable (ordered) normalization process for the UK’s monetary policy. This study verifies a research hypothesis which states that the BVAR model might be a useful tool in the Bank of England’s decision-making process regarding the normalization of its monetary policy. Additionally, the cause and effect analysis, observation method, document analysis method, and synthesis method were also considered. The conducted research indicates that a large BVAR model has a significant predictive value for short-term forecasting.

scholarly journals Over- and Underbidding in Central Bank Open Market Operations Conducted as Fixed Rate Tender

2005 ◽  
Vol 6 (1) ◽  
pp. 95-130 ◽  
Author(s):  
Ulrich Bindseil
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Banking System ◽  
Central Banks ◽  
General Question ◽  
Open Market ◽  
Short Term ◽  
Fixed Rate ◽  
Proposed Model

Abstract Open market operations play a key role in allocating central bank funds to the banking system and thereby in steering short-term interest rates in line with the stance of monetary policy. Many central banks apply so-called ‘fixed rate tender’ auctions in their open market operations. This paper presents, on the basis of a survey of central bank experience, a model of bidding in such tenders. In their conduct of fixed rate tenders, many central banks faced specifically an ‘under-’ and an ‘overbidding’ problem. These phenomena are revisited in the light of the proposed model, and the more general question of the optimal tender procedure and allotment policy of central banks is addressed.

Conducting Monetary Policy at Very Low Short-Term Interest Rates

2004 ◽  
Vol 94 (2) ◽  
pp. 85-90 ◽  
Author(s):  
Ben S Bernanke ◽  
Vincent R Reinhart
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Short Term

scholarly journals Importance Of Money And Credit

2011 ◽  
Vol 8 (1) ◽  
Author(s):  
Michael Cosgrove ◽  
Daniel Marsh
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Federal Reserve ◽  
Rapid Growth ◽  
Credit Crisis ◽  
Short Term ◽  
Demand For Money ◽  
The Stability

The thesis of this paper is that the Federal Reserve could better achieve their goals if they paid more attention to quantity targets of both money and credit. The rapid growth in credit that ended in the credit crisis of 2007 and 2008 might have been avoided had the Federal Reserve attempted to incorporate quantitative credit measures in assessing policy. But their focus on short-term interest rates in conducting monetary policy to the exclusion of credit measures led to inaction on their part. The stability of the demand for money and credit determined by this analysis suggests the Federal Reserve could have taken policy steps early in this cycle jawboning, quantitative and regulatory to temper the credit bubble and potentially avoid the credit crisis.

scholarly journals Interest Rate Channel of Monetary Policy Transmission Mechanism and Commercial Banks Earnings in Nigeria

2021 ◽  
Vol 4 (3) ◽  
pp. 194-214
Author(s):  
Uzah K. C. ◽  
Clinton A.M. ◽  
Kpagih L.
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Commercial Banks ◽  
Transmission Mechanism ◽  
Monetary Policy Transmission ◽  
Short Term ◽  
Policy Transmission ◽  
Lending Rate ◽  
Monetary Policy Transmission Mechanism

This study examined the interest rates channel of the monetary policy transmission mechanism and the earnings of commercial banks in Nigeria. The objective was to investigate the extent to which the interest rates channel of the monetary policy transmission mechanism affects the earnings capacity of the quoted commercial banks. Time series data were sourced from annual financial reports of the commercial banks and the Central Bank of Nigeria statistical bulletin’s various issues. Earnings measures such as earnings per share and earnings before interest and tax were modeled as the function of Monetary Policy Rate, Prime Lending Rate, Short-term Savings Rate, Long-term Saving Rate and Maximum Lending Rate. The Ordinary Least Square method of Regression Analysis was used to estimate the relationship between the dependent and the independent variables. Augmented Dickey Fuller Test, Johansen Cointegration Test, Granger Causality Test and Vector Error Correction Test were used to determine the dynamic relationship among the variables. Findings showed that short-term and long-term savings rates have negative effects while monetary policy rate, maximum lending rate and prime lending rate have positive effects on the earnings capacity of Nigerian commercial banks. Therefore, we recommend that interest rate policies should be integrated with the earning objectives of the commercial banks.

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