scholarly journals The impact of the excess reserves of the banking sector on interest rates and money supply in Poland

2021 ◽  
Author(s):  
Mariusz Kapuściński ◽  
Ilona Pietryka
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Money Supply ◽  
Banking Sector ◽  
Money Market ◽  
Vector Autoregressive ◽  
Excess Reserves ◽  
Market Interest Rate ◽  
The Impact

In this monograph we aim to analyse the effects of leaving excess reserves in the banking sector by the central bank on the level and the variability of interest rates, as well as on money supply. To this end, we use mainly data for Poland, but in some cases, for robustness, also for a panel of Poland, the euro area, the Czech Republic and Hungary, as there had only been a limited variability in some policy variables in our sample for Poland. We estimate the parameters of GARCH, (P)VAR (vector autoregressive or panel vector autoregressive) and (panel) linear regression models. We find that excess reserves affect the level and the variability of an overnight money market interest rate. However, the variability of the overnight money market interest rate, shaped to a large extent by excess reserves, does not affect the level of longer-term interest rates, and we find little evidence of its impact on their variability. Neither do excess reserves translate into higher money supply. Our results imply that the current monetary policy operational framework in Poland is adequate to ensure the transmission of the central bank policy rate to money market interest rates. Furthermore, it appears unlikely that raising the amount of excess reserves left, as proposed by some policymakers, would affect money supply. Instead, it would lower the money multiplier and the overnight money market interest rate, as well as increase its volatility.

The effect of negative policy rates on the interest-rate pass-through mechanism in the eurozone

2019 ◽  
Vol 7 (2) ◽  
pp. 247-262 ◽  
Author(s):  
Yannis Panagopoulos ◽  
Ekaterini Tsouma
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Money Market ◽  
Negative Interest Rates ◽  
Time Period ◽  
Pass Through ◽  
The Interest Rate ◽  
The Impact ◽  
The Relationship

This paper examines the impact of the June 2014 switch to negative interest rates (NIRs) by the European Central Bank (ECB) on the operation of the eurozone interest-rate pass-through (IRPT) mechanism. We focus on the relationship between major central-bank policy rates and selected money-market rates. That link is identified as the first stage of the IRPT mechanism and its dynamics are analysed using Granger causality and cointegration techniques for the time period January 2000–June 2017. Our empirical findings indicate a feedback relationship between the ECB policy and the money-market rates in the period prior to June 2014, but that relationship is non-operative when considering only the period of NIRs.

Research on the transmission mechanism between the money market interest rates and the capital market interest rates

2016 ◽  
Vol 6 (2) ◽  
pp. 110-124
Author(s):  
Xiu Zhang ◽  
Shoudong Chen ◽  
Yang Liu
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Capital Market ◽  
Bond Market ◽  
Money Market ◽  
Transmission Mechanism ◽  
Content Type ◽  
Market Interest Rate

Purpose – The purpose of this paper is to empirically analyze the transmission mechanism between benchmark interest rate of financial market, money market interest rate and capital market yields in order to reveal the dynamic evolution characters and core influential structure between different market interest rates. Design/methodology/approach – Using Dirichlet-VAR (DVAR) model, this study analyze the relationship between markets rates according to the equilibrium model in money market and capital market. Findings – Empirical results show that the interest rate transmission mechanism functions smoothly between interest rates of different levels. Interest rate of bills issued by the central bank can effectively reflect changes in monetary policy and guide the fluidity of market, playing the anchor role in interest rate pricing. There exists a closed loop feedback between interest rate of bills issued by the central bank, and money market interest rate, as well as between money market interest rate and bond market interest rate. The former is a loop by administrative means while the latter is the one mainly affected by market-oriented means. The response by money market and bond market toward the change of benchmark interest rate is unsymmetrical as money market is more sensitive to a loose monetary policy while bond market is more sensitive to a tight monetary policy. Stock market is strongly affected by uncertainty of benchmark interest rate. Originality/value – DVAR model is the extension of research on instable data and multiple variable causality test, which expands the causality analysis between two variables to multiple variables causality impact analysis which contains non-stable and structurally instable economic data.

scholarly journals The Effects of Money Supply and Interest Rates on Stock Prices, Evidence from Two Behavioral Experiments

2021 ◽  
Vol 8 (2) ◽  
pp. 33
Author(s):  
Christian A. Conrad
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Stock Market ◽  
Interest Rates ◽  
Money Supply ◽  
Stock Prices ◽  
Positive Impact ◽  
Real Economy ◽  
Behavioral Experiments ◽  
The Impact

What is the impact of interest rate and monetary policy on the stock market? Some studies find a positive impact of expansive monetary policy on stock prices others prove the opposite. This paper examines the effects of monetary expansion and interest rate changes on investment behavior on the stock market by illustrating two behavioral experiments with students. In our experiments the increase of money supply and the decrease of interest rates had a direct positive impact on share prices. These findings support the hypothesis that extreme expansive monetary policy with low, zero or negative interest rates encourage financial bubbles on the stock market. To avoid a crash the exit from such a policy must be slow. As happened in 1929, crashes can damage the financial system and the real economy. Central banks must take this into account in their monetary policy.

Impact of Interest Rate Changes on the Profitability of four Major Commercial Banks in Pakistan

2014 ◽  
Vol 4 (1) ◽  
pp. 142 ◽  
Author(s):  
Waseem Ahmad Khan ◽  
Abdul Sattar
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Commercial Banks ◽  
Banking Sector ◽  
Pearson Correlation ◽  
Correlation Method ◽  
Economic Stability ◽  
Independent Variable ◽  
The Interest Rate ◽  
The Impact

The core objective of this project is to analyze the impact of interest rates changes on the profitability of commercial banks being operated in Pakistan by examining the financial statements of four major banks during 2008 to 2012. Like the efficiency of banking sector is considered most important for economic growth, monetary policy implementation and macro-economic stability. From the past few years, interest spread of banking sector of Pakistan is rising. As a result variations in the interest rate depress the savings and investment and on the other hand it increases the efficiency of banks’ lending. In this paper interest rate is an independent variable and bank profitability is a dependent variable. To examine the impact of interest rate changes on the profitability of commercial banks in Pakistan, Pearson correlation method is used in this study. As a result it is found that there is strong and positive correlation between interest rate and commercial banks’ profitability. It means if the value of interest rate is increases/decreases then as result value of banks’ profitability will also increases/decreases.

Money and Credit in the New Keynesian Model

2014 ◽  
Vol 65 (3) ◽  
Author(s):  
Sven Offick ◽  
Hans-Werner Wohltmann
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Banking Sector ◽  
New Keynesian ◽  
Credit Channel ◽  
New Keynesian Model ◽  
Static Approximation ◽  
Keynesian Model ◽  
The Interest Rate

AbstractThis paper integrates a money and credit market into a static approximation of the baseline New Keynesian model based on a money-and-credit-in-the-utility approach, in which real balances and borrowing contribute to the household’s utility. In this framework, the central bank has no direct control over the interest rate on bonds. Instead, the central bank’s instrument variables are the monetary base and the refinancing rate, i. e. the rate at which the central bank provides loans to the banking sector. Our approach gives rise to a credit channel, in which current and expected future interest rates on the bond and loan market directly affect current goods demand. The credit channel amplifies the output effects of isolated monetary disturbances. Taking changes in private (inflation and interest rate) expectations into account, we find that - contrarily to BERNANKE and BLINDER (1988) - the credit channel may also dampen the output effects of monetary disturbances. The expansionary effects of a monetary expansion may be substantially diminished if the monetary disturbance is accompanied by a contractionary credit shock. In a dynamic version of our model, in which expectations are formed endogenously, we find that the credit channel amplifies output responses.

scholarly journals Considerations Concerning the Impact of Propensities on Basic Macroeconomic Occurrences

2008 ◽  
Vol 7 (1) ◽  
pp. 109-116 ◽  
Author(s):  
Mariusz Doszyń
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Money Supply ◽  
National Income ◽  
General Definition ◽  
Consumption Expenditures ◽  
Keynesian Model ◽  
Definition Of ◽  
The Impact

Considerations Concerning the Impact of Propensities on Basic Macroeconomic Occurrences In the article theoretical deliberations relating to impact of propensities on basic macroeconomic phenomena were presented. A general definition of propensity was discussed. The influence of propensity for consumption, propensity for investment and propensity for thesaurization on national income, interest rates, consumption expenditures, investments and money supply was analyzed. Derivatives that make it possible to identify quantitative effects of propensities were introduced. On the basis of the discussed Keynesian model it is possible to say that the propensity to consume increases interest rate and national income, the propensity to invest makes investments, national income and interest rates higher and the propensity for thesaurization could increase interest rates by lowering money supply.

scholarly journals DAMPAK KEBIJAKAN FISKAL DAN MONETER DALAM PEREKONOMIAN INDONESIA

2020 ◽  
Vol 2 (3) ◽  
Author(s):  
Ada Tua Pardamean
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Money Supply ◽  
Government Expenditure ◽  
Secondary Data ◽  
Tax Revenue ◽  
Linear Regression Models ◽  
The Government ◽  
The Impact

The trade-off between achieving price stability and economic growth, especially in the short term is the impact of a decision-making dilemma for the conduct of fiscal policy or monetary policy in the Indonesian economy. The problem is what lies behind this study and aimed to determine the impact of fiscal and monetary policies on the Indonesian economy. The data used are secondary data sourced from Bank Indonesia and BPS variables namely GDP, Government Expenditure, Tax Revenue, Export, Exchange Rate, Money Supply, Interest Rates for time series from 2000 to 2012. Data analysis was performed using Two Stage Least Squares (TSLS) estimation with multiple linear regression models using Eviews 5.0 program assistance. The results of this study it can be concluded that the simultaneous equation model on IS to variable Interest Rate and a significant negative effect on GDP of Indonesia, while the Government Expenditure variable (G0), Export (X0) and Tax Revenue (Tx) and Exchange Rate (ER) effect positively and significantly to Indonesia's GDP, while the equation for the LM model of the Money Supply variables significantly and negatively related to Indonesia's GDP increased at a rate statistically a = 10% and for variable interest rate is not significantly to Indonesia's GDP.

scholarly journals Empirical evidence on Non-Performing Loans and credit frictions: banking sector in Tunisia

2020 ◽  
Vol 2 (3) ◽  
pp. 171-183
Author(s):  
Salha Ben Salem ◽  
◽  
Moez Labidi ◽  
Nadia Mansour ◽  
◽  
...  
Keyword(s):  
Interest Rate ◽  
Error Correction ◽  
Money Supply ◽  
Banking Sector ◽  
Vector Error Correction Model ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Market Interest Rate ◽  
Credit Frictions

Purpose: This paper explores the most important determinants of friction in the Tunisian credit market. The previous literature argued that friction is largely explained by the increase in Non-Performing Loans Nkusu, 2011; Abadi et al. 2014; Rulyasri et al.2017, Roland et all, 2013. Research methodology: We constructed a multivariate Vector Error Correction Model, with five macroeconomic variables (industrial production index, the money supply, money market interest rate) to examine the impact of Non-Performing Loans increase in amplifying the Tunisian credit frictions. Results: The Vector Error Correction Model (VECM) regression results show a negative and important relationship between economic growth and Non-Performing Loans (NPL) ratio, which is very robust during the political crisis of 2011. The money market interest rate and the money supply are positively related to the Non-Performing loan ratio. Limitation: This study was only focused on Tunisian banking sector as one of the pillars of the Tunisian economy. Contributions: This highlights that the nature of the monetary policy adopted by the monetary authority of Tunisia plays a significant role in the fluctuation of the Non-Performing Loans ratio. Bank capitalization is positively and statistically significant with Non-Performing Loan ratio, implying that banks with a low level of capital are more likely to have a riskier credit portfolio that causes the increase of Non-Performing Loans in their balance sheet.

scholarly journals Analisis Penerapan Kebijakan Moneter Suku Bunga Jangka Pendek pada Variabel-variabel Endogen MakroEkonomi Indonesia

2014 ◽  
Vol 5 (2) ◽  
pp. 638
Author(s):  
Sari Damayanti
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Careful Examination ◽  
Vector Autoregressive ◽  
Real Gdp ◽  
Endogenous Variables ◽  
Potential Risks ◽  
The Impact

This study analyzed the impact of the implementation of monetary policy through short-term interest rates setting on the variation that occurs in the endogenous variables of Indonesian macro economy in the period of 2000-2009 by implementing the Structural Vector Autoregressive approach (SVAR) which is the development of Vector Autoregressive (VAR) modelling with Eviews program. By careful examination of the results, this study indicates that the value of interest rate changes is significantly associated with shocks that are associated with monetary policy. The monetary sector is heavily influenced by real GDP shock, liquidity, and inflation shock. However, the monetary sector is only slightly affected by the decomposition of the variance of the exchange rate, which is very sensitive to the inflation shock. The study also indicates that the endogenous variables in the value of changes in interest rates and real exchange rate of rupiah will be close to convergence in the long term. The endogenous variables are more susceptible to changes in variables derived from domestic, such as the level of demand for domestic currency liquidity, compared to variables derived from international capital exposure. Thus, the value of the variable interest rate changes can be used to reduce the potential risks derived from domestic money demand shock.

scholarly journals Competition in the Georgian banking sector and its impact on the credit policy of commercial banks

2021 ◽  
Vol 342 ◽  
pp. 08003
Author(s):  
George Abuselidze ◽  
Mariam Sharabidze
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Commercial Banks ◽  
Banking Sector ◽  
Current Situation ◽  
Competitive Environment ◽  
Credit Policy ◽  
The Impact ◽  
The Relationship

Based on the role of banking sector in the development of the country’s economy, we consider it important to study the current situation in this sector. The existence of a competitive environment ensures the efficient functioning of the banking sector. The aim of the study is to estimate the competitive environment in the banking sector, to determine the relationship between competition and interest rates. The research is based on the use of different economic models and indexes. Competition in the banking sector is studied on the example of Georgian banking sector, for that we used HHI Net Loans and H-statistic indicators. The study analyses the impact of competition in the banking sector on the net interest income and interest rate in the same sector.

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