scholarly journals THE EFFECTIVENESS OF THE FUNCTIONING OF THE INTEREST RATE CHANNEL OF MONETARY TRANSMISSION IN UKRAINE

2021 ◽  
Author(s):  
Volodymyr Mishchenko ◽  
Svitlana Naumenkova ◽  
Svitlana Mishchenko
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Operating Conditions ◽  
Monetary Transmission ◽  
Basic Principles ◽  
Interest Rate Policy ◽  
National Bank ◽  
Rate Policy ◽  
The Interest Rate ◽  
Interest Rate Channel

Ensuring a high level of monetary regulation of the economy and improving the efficiency of the central bank's monetary policy largely depend on how effective is the mechanisms of transmission of monetary impulses from the decisions of monetary authorities to market participants through the use of monetary transmission. Given that in the current environment, interest rate policy is the main component of the monetary policy of the vast majority of central banks, interest rate channel is important in the process of monetary transmission. This is also due to the fact that in the monetary transmission system, the interest channel is most closely linked to the mechanisms of functioning of monetary, credit and currency channels. Solving this problem requires the identification the role of the interest channel in the mechanism of monetary transmission, the peculiarities of its function in current conditions, revealing clear causal links and the basic principles of the systematic regularity of monetary development. In addition, it is necessary to identify clear criteria and methods for assessing the effectiveness of the channel, as well as systems and indicators, which allow the use of several parameters in the flow of interest to the channel on the basis of monetary and macroeconomic indicators. The conducted research is based on the statistics of the National Bank of Ukraine for 2005-2020, the system of economic-statistical and economic-mathematical methods, as well as on the calculation of indicators, and is characterize the reliability of models. Quantitative assessment of the efficiency and operating conditions of the interest rate channel of the monetary transmission mechanism should be based on the basic principles of monetary theory and a reliable statistical base. This suggests ways to improve the efficiency of the interest rate channel through the central bank's interest rate policy, adequate money market conditions, and prudent government borrowing policies in the domestic market to ensure efficient transmission of monetary impulses from the central bank to the real sector of the economy. The results of the study can be used to substantiate the forecast parameters of monetary indicators of the monetary policy of the National Bank of Ukraine (NBU) and the conditions of effective functioning of the interest rate channel of monetary transmission in Ukraine in the medium term.

The Role of Different Channels in Transmitting Monetary Policy into Output and Price in Vietnam

2015 ◽  
pp. 20-40
Author(s):  
Vinh Nguyen Thi Thuy
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Money Supply ◽  
Monetary Transmission ◽  
Impulse Response Functions ◽  
Short Run ◽  
The Exchange Rate ◽  
The Interest Rate ◽  
Interest Rate Channel

The paper investigates the mechanism of monetary transmission in Vietnam through different channels - namely the interest rate channel, the exchange rate channel, the asset channel and the credit channel for the period January 1995 - October 2009. This study applies VAR analysis to evaluate the monetary transmission mechanisms to output and price level. To compare the relative importance of different channels for transmitting monetary policy, the paper estimates the impulse response functions and variance decompositions of variables. The empirical results show that the changes in money supply have a significant impact on output rather than price in the short run. The impacts of money supply on price and output are stronger through the exchange rate and credit channels, but however, are weaker through the interest rate channel. The impacts of monetary policy on output and inflation may be erroneous through the equity price channel because of the lack of an established and well-functioning stock market.

scholarly journals Monetary Policy Shocks in the Russian Economy and Their Macroeconomic Effects

2019 ◽  
Vol 14 (4) ◽  
pp. 48-75
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Empirical Evidence ◽  
Monetary Policy Shocks ◽  
Interest Rate Policy ◽  
Russian Economy ◽  
Policy Shocks ◽  
Rate Policy ◽  
The Interest Rate

This section conducts an estimate of the impulse response function of key macroeconomic variables to monetary policy shocks in Russia. The estimates are carried out through a dynamic factor model (DFM) of the Russian economy with structural identification of shocks by imposing various sets of sign restrictions on the behavior of endogenous variables. We restricted first the monetary aggregate M2 only (a decrease in response to an increase of the Key rate), and then—simultaneously—M2, real effective exchange rate (an increase), and GDP (a decrease). We estimated the DFM using a large dataset of 58 macroeconomic and financial variables. The estimation results suggest that there is no decreasing response of consumer prices to an exogenous tightening of the interest rate policy of the Central Bank of Russia. This empirical evidence is supported implicitly by DFM-based predictions that under the imposition of such a decreasing response as an identifying restriction to the model, a positive interest rate shock is not transmitted through the interest rate channel of monetary policy to expected increases of the interest rates on commercial loans and private deposits. However, existing empirical evidence refutes this model-based result. Therefore, this study supports the view according to which a tightening of monetary policy in Russia is inefficient in terms of restraining inflation. In addition, monetary policy shocks negatively affect investments, retail sales, export and import, real wages, and employment. Different economic activities react differently to monetary policy shocks: export-oriented activities are not sensitive to these shocks, whereas domestic pro-cyclical activities (e.g. construction) can be substantially depressed in response to unexpected increases of interest rates. Finally, the expectations of economic agents are also significantly affected by shocks in the interest rate policy of the Bank of Russia.

scholarly journals The Effects of Monetary Policy on House Prices in Spain: the role of the economic and monetary union membership in the housing bubble prior to the great recession

2018 ◽  
Vol 2 (2) ◽  
pp. 5
Author(s):  
Tibor Pál
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
House Prices ◽  
Monetary Transmission ◽  
Interest Rate Policy ◽  
Housing Boom ◽  
Rate Policy ◽  
The Impact

Aim: This paper aims to discover the evolution of monetary transmission in Spain by focusing on the short-term interest rate, credit aggregates and house prices through different stages of economic development and European integration between 1975 and 2008. In addition, the analysis devotes special attention to the interval of the last housing boom, in order to reveal the importance of the interest rate policy of the ECB.Design / Research methods: The study applies a tri-variate autoregressive model assigned to three overlapping periods outlined by regime shifts in the Spanish economy. The estimation output determines the strength and persistency of the links between interest rates, credit aggregates and house prices. Consequently, the results of the econometric analysis provide proper base for comparison in order to identify the dominating channels of monetary transmissions through a prolonged period.Conclusions / findings: It is found that the transmission mechanism in Spain essentially altered over time since 1975. At the beginning of the full analysed interval the role of the credit channel was dominant, then its importance gradually diminished. After the EMU accession the traditional interest rate channel became the leading factor with an intensified and more persistent effect on house prices.Originality / value of the article: While there are numerous researches aimed at estimating the impact of monetary policy on the real economy, empirical studies focusing exclusively on the link between interest rate policy and house prices in Spain are still rare. As the present paper concentrates solely on the Spanish characteristics through extended interval, the study provides country-specific inferences.Implications of the research: Understanding the mechanism of the monetary policy effects on the housing sector is an essential aspect of designing policy interventions aimed at keeping house price development in check.Limitations of the research: Despite the significant results of the empirical analysis, the excessively dynamic increase in the property prices suggests that the factor of irrational expectations also played important role in the latest Spanish housing bubble.Key words: Monetary policy, VAR, ECB, Housing boom, Monetary transmission mechanismJEL: E52, E58.

scholarly journals Monetary Transmission through Interest Rate Channel in Vietnam Before and After the Crisis

2014 ◽  
Vol 222 ◽  
pp. 51-75
Author(s):  
Hương Trầm Thị Xuân ◽  
Vinh Võ Xuân ◽  
CẢNH NGUYỄN PHÚC
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Monetary Transmission ◽  
Var Model ◽  
Macroeconomic Theory ◽  
Cost Channel ◽  
Before And After ◽  
The Cost ◽  
The Impact ◽  
Interest Rate Channel

The paper employs the VAR model to examine the impact of monetary policy on the economy through interest rate channel (IRC) and levels of transmission before and after the 2008 crisis. The results indicate that in the period before the financial crisis, IRC exists in accordance with macroeconomic theory; however, the crisis period, in which increases in SBV monetary policy rates lead to increased inflation, has proved the existence of the cost channel of monetary transmission in Vietnam.

scholarly journals Negative Interest Rate Risk. Atavism or Normalization of Central Banks’ Monetary Policy

2019 ◽  
Vol 3 (342) ◽  
pp. 89-116
Author(s):  
Irena Pyka ◽  
Aleksandra Nocoń
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Central Banks ◽  
Interest Rate Risk ◽  
Interest Rate Policy ◽  
Rate Policy ◽  
Negative Interest Rate Policy

In the face of the global financial crisis, central banks have used unconventional monetary policy instruments. Firstly, they implemented the interest rate policy, lowering base interest rates to a very low (almost zero) level. However, in the following years they did not undertake normalizing activities. The macroeconomic environment required further initiatives. For the first time in history, central banks have adopted Negative Interest Rate Policy (NIRP). The main aim of the study is to explore the risk accompanying the negative interest rate policy, aiming at identifying channels and consequences of its impact on the economy. The study verifies the research hypothesis stating that the risk of negative interest rates, so far unrecognized in Theory of Interest Rate, is a consequence of low effectiveness of monetary policy normalization and may adopt systemic nature, by influencing – through different channels – the financial stability and growth dynamics of the modern world economy.

Downfall of the Regulatory System and Triumph of the Market

2020 ◽  
pp. 230-250
Author(s):  
Einar Lie
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Western Europe ◽  
Regulatory System ◽  
Exchange Rate Policy ◽  
Oil Price ◽  
Interest Rate Policy ◽  
Institutional Legitimacy ◽  
Rate Policy ◽  
The Interest Rate

This chapter discusses how, in the 1970s and 1980s, Norges Bank began to develop instruments with a view to steering economic policy under freer market conditions. However, governments of changing political hues were unwilling to let go of the low interest rate. The oil price fall in 1986 brought an abrupt change in interest rate and credit policy. The government’s tightening actions included the introduction of a more binding fixed exchange rate policy. The frequent recourse to corrective devaluations was to be a thing of the past. Hence, there was a justification for using the interest rate as an ongoing instrument to stabilize the exchange rate. This task fell to Norges Bank. The transition to an independent, active interest rate policy on the part of the central bank was abrupt and came as a surprise. Barely a year before the collapse of the oil price, the Storting had passed a law that made Norges Bank one of the least autonomous central banks in all of western Europe. Ultimately, it was the external situation, and in no sense an increase in government’s and the public’s recognition of the bank and its institutional legitimacy, that restored greater operative autonomy to Norges Bank.

Modeling of the interest rate policy of the central bank of Russia

2017 ◽  
Author(s):  
A. G. Shelomentsev ◽  
D. B. Berg ◽  
A. A. Detkov ◽  
A. P. Rylova
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rate Policy ◽  
Rate Policy ◽  
The Interest Rate

Monetary Policy's Influence on Real Estate Price in China: An Analysis Based on VAR Model

2013 ◽  
Vol 850-851 ◽  
pp. 1003-1007
Author(s):  
Xiong Song He ◽  
Guo Lin Deng
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Real Estate ◽  
Money Supply ◽  
Var Model ◽  
Response Analysis ◽  
Interest Rate Policy ◽  
The Real Estate ◽  
Real Estate Price ◽  
Rate Policy

Monetary policy has a significant effect on real estate price, and monetary policymakers need to have quick response. Based on the assumptions that monetary policy and real estate price influence each other and variables affect one another with a lag, A VAR model is designed and modified. Through impulse-response analysis and variance analysis, the influence of money supply and that of interest rate on real estate price are tested and compared. We found that: both money supply and interest rate could affect the real estate price; interest rate has a bigger influence that money supply does; as time goes on, the influence of money supply changes little, but that of interest rate enhances; interest rate policy is not easy to control and it will lead to a fluctuation of economy and the fluctuation may enhance, money supply is a better method to regulate real estate industry instead.

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