The Ability of Selected European Countries to Face the Impending Economic Crisis Caused by COVID-19 in the Context of the Global Economic Crisis of 2008

This paper is devoted to the ability of selected European countries to face the potential economic crisis caused by COVID-19. Just as other pandemics in the past (e.g., SARS, Spanish influenza, etc.) have had negative economic effects on countries, the current COVID-19 pandemic is causing the beginning of another economic crisis where countries need to take measures to mitigate the economic effects. In our analysis, we focus on the impact of selected indicators on the GDP of European countries using a linear panel regression to identify significant indicators to set appropriate policies to eliminate potential negative consequences on economic growth due to the current recession. The European countries are divided into four groups according to the measures they took in the fiscal consolidation of the last economic crisis of 2008. In the analysis, we observed how the economic crisis influences GDP, country indebtedness, deficit, tax collection, interest rates, and the consumer confidence index. Our findings include that corporate income tax recorded the biggest decline among other tax collections. The interest rate grew in the group of countries most at risk from the economic crisis, while the interest rate fell in the group of countries that seemed to be safe for investors. The consumer confidence index can be considered interesting, as it fell sharply in the group of countries affected only minimally by the crisis (Switzerland, Finland).

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The Impact of Interest Rate Ceilings on Microfinance Industry

International Journal of Social Work ◽

10.5296/ijsw.v2i2.7953 ◽

2015 ◽

Vol 2 (2) ◽

pp. 10

Author(s):

Ali Saleh Alshebami ◽

D. M. Khandare

Keyword(s):

Interest Rate ◽

Interest Rates ◽

Low Income ◽

Secondary Data ◽

Research Subject ◽

Access To Credit ◽

The Poor ◽

Good Intention ◽

The Interest Rate ◽

The Impact

<p>Imposing ceilings on the interest rate has recently become one of the new hottest topics in microfinance industry; various debates have been discussing this issue to know the effect of interest rate ceilings on the supply of credit in particular and on microfinance industry in general. However in spite of the good intention behind these ceilings, there was no absolute result stating that ceilings have really contributed to the improvement or protection of the poor clients, indeed, these ceilings have hurt those low income people instead of helping them, due to these ceilings most of MFIs left the market or reduced their scale due to the inability to continue operating with low interest rate leaving the very poor clients without access to credit. Thus, the purpose of this paper is to review the impact of imposing such ceilings on the interest rates and to find out what alterative solutions can be employed as substitutes for them. This paper is entirely based on the secondary data collected from various records related to microfinance such as microfinance books, official websites and reports, published papers, and other sources related to the research subject.</p>

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On the Judicial Interest Rate: Towards a Law and Economic Theory

Journal of European Tort Law ◽

10.1515/jetl-2013-0002 ◽

2013 ◽

Vol 4 (1) ◽

pp. 34-62

Author(s):

Hugo A Acciarri ◽

Nuno Garoupa

Keyword(s):

Interest Rate ◽

Interest Rates ◽

Law And Economics ◽

Policy Instruments ◽

Institutional Settings ◽

Rules Of Procedure ◽

The Interest Rate ◽

Substantive Law ◽

The Impact ◽

Neutral Effect

AbstractWhile all legal systems implement a form of pre-judgment or post-judgment interest, there is a dearth of literature on substantive law and economics analysing the impact, functioning, and assessment of the judicial interest rate. Current legal scholarship typically views the interest rate as having a neutral effect on private and social costs. This paper demonstrates that the issue is theoretically far more complex and largely influential in legal policy. Due to the asymmetric opportunity costs for each party in a case, judicial interest rates may lead to improper delay of proceedings or the decoupling of damages from recovery. These potential results influence the number of settlements and suits. On this ground, we compare different institutional settings from an economic perspective and conclude that the appropriate mechanism depends on the alternative policy instruments available, namely, the rules of procedure, court fees, or mechanisms for appropriately setting damages. Further, we argue that abolishing the statute which sets pre-judgment interest may be a proposal worth considering.

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A Tax-Based Estimate of the Elasticity of Intertemporal Substitution

Quarterly Journal of Finance ◽

10.1142/s2010139213500018 ◽

2013 ◽

Vol 03 (01) ◽

pp. 1350001 ◽

Cited By ~ 33

Author(s):

Jonathan Gruber

Keyword(s):

Time Series ◽

Interest Rate ◽

Interest Rates ◽

Consumer Expenditure ◽

Intertemporal Substitution ◽

Tax Rate ◽

Elasticity Of Intertemporal Substitution ◽

Using Data ◽

The Interest Rate ◽

The Impact

One of the most important behavioral parameters in macroeconomics is the elasticity of intertemporal substitution (EIS). Starting with the seminal work of Hall (Hall, R., 1978, Stochastic Implications of the Life Cycle — Permanent Income Hypothesis: Theory and Evidence, Journal of Political Economy 86, 971–987), researchers have used an Euler equation framework to estimate the EIS, relating the growth rate of consumption to the after-tax interest rate facing consumers. This large literature has, however, produced very mixed results, perhaps due to an important limitation: The impact of the interest rate on consumption or savings is identified by time-series movements in interest rates. Yet the factors that cause time-series movements in interest rates may themselves be correlated with consumption or savings decisions. I address this problem by using variation across individuals in the capital income tax rate. Conditional on observable characteristics of individuals, tax rate movements cause exogenous shifts in the after-tax interest rate. Using data on total non-durable consumption from the Consumer Expenditure Survey over two decades, I estimate a surprisingly high EIS of two. This finding is robust to a variety of specification checks.

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Inflation Instability Impact on Interest Rate in Egypt: Augmented Fisher Hypothesis Test

Applied Economics and Finance ◽

10.11114/aef.v5i1.2709 ◽

2017 ◽

Vol 5 (1) ◽

pp. 1 ◽

Cited By ~ 1

Author(s):

Doaa Akl Ahmed ◽

Mamdouh Abdelmoula M. Abdelsalam

Keyword(s):

Interest Rate ◽

Interest Rates ◽

Negative Impact ◽

Hypothesis Test ◽

Portfolio Theory ◽

Expected Inflation ◽

Fisher Hypothesis ◽

The Interest Rate ◽

The Impact ◽

Autoregressive Conditional Heteroscedasticity

The paper aims at examining an augmented version of Fisher hypothesis that include inflation instability. According to this hypothesis, there is a positive relation between interest rates and expected inflation. In contrast, there is a debate regarding the impact of inflation uncertainty on interest rate. According to the portfolio theory and models of asset pricing, inflation instability positively affects the interest rate. The reason is that risk-averse investors must be compensated with higher returns for higher risks. In contrast, the loanable funds theory implies a negative impact of inflation instability and interest rates since high uncertainty leads consumers to protect themselves against inflation by raising their savings which lowers consumption and interest rates. To compute inflation volatility, we applied different Autoregressive Conditional Heteroscedasticity models. The simple and augmented versions of Fisher hypothesis are examined using Markov Switch Model to account for possible regime shift in that relationship. For the original Fisher hypothesis, there is an evidence of supporting it in the first regime while that hypothesis does not hold in the second one. In the augmented version of Fisher hypothesis, portfolio theory hypothesis is verified in the first regime whereas the loanable funds hypothesis is confirmed in the second one.

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Using Expected Geometric Values to Calculate the Cost of Interest in Hyper-inflationary Environments: the Case of Venezuela

Nepalese Journal of Insurance and Social Security ◽

10.3126/njiss.v2i2.31825 ◽

2019 ◽

Vol 2 (2) ◽

pp. 10-21

Author(s):

J. Tim Query ◽

Evaristo Diz Cruz

Keyword(s):

Interest Rate ◽

Interest Rates ◽

Expected Value ◽

Defined Benefit ◽

High Inflation ◽

Defined Benefit Plans ◽

The Interest Rate ◽

The Cost ◽

The Impact ◽

The Relationship

It is of vital importance to explore the relationship between pensions and inflationary levels because this forms a link between social policy and economic development in the context of Venezuela’s challenging economy and its impact on the development of pension systems. With such rampant inflation, companies must adjust the rates of salary increases to avoid a significant decrease in the purchasing power of income from defined benefit plans. Our research seeks to find the possibility of using an average geometric rate of future interest rates expressed as an expected value to discount obligations. Consequently, the cost of interest associated with the actuarial liability of the Benefit plans increases substantially in the next fiscal period to the actuarial valuation, sometimes compromising its sustainability over time. In order to minimize this problem, two scenarios for calculating the interest rate are proposed to smooth out this volatile effect; both are based on a geometric average with the expectation of working life or with the duration of the obligations. We are careful to use a reasonable interest rate that is not so high as to compromise the cash flow, resulting in skewed annual results of the companies. Our research seeks to find the possibility of using an average geometric rate of future interest rates expressed as an expected value to discount obligations. We formulate and actuarially evaluate two different scenarios, based on job expectations and Macaulay's duration, of the obligations that allow the sustainability of the plan in an environment of extremely high inflation. To illustrate the impact of the basic annual expenditure of the period, the results of an actuarial valuation of an actual Venezuelan company were utilized. Despite some companies adjusting their book reserves increasingly through a geometric progression, the amounts associated with the costs of interest would be huge in any such adjustment pattern. Therefore, we suggest adoption of one of the alternatives described in the research.

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

International Journal of Accounting and Financial Reporting ◽

10.5296/ijafr.v4i1.5630 ◽

2014 ◽

Vol 4 (1) ◽

pp. 142 ◽

Cited By ~ 4

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.

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“Corruption premium” on municipal borrowing cost: the case of Spanish Mayors

Journal of Public Budgeting Accounting & Financial Management ◽

10.1108/jpbafm-12-2018-0143 ◽

2019 ◽

Vol 31 (3) ◽

pp. 392-409 ◽

Cited By ~ 1

Author(s):

Francisco Bastida ◽

María-Dolores Guillamón ◽

Bernardino Benito ◽

Ana-María Ríos

Keyword(s):

Panel Data ◽

Interest Rate ◽

Interest Rates ◽

Financial Management ◽

Generalized Method Of Moments ◽

Significant Risk ◽

Legal Framework ◽

Content Type ◽

The Interest Rate ◽

The Impact

Purpose The purpose of this paper is to examine the impact of mayors’ corruption on the municipal interest rate set by lenders. Design/methodology/approach The sample consists of a panel data for all the Spanish cities with population over 50,000 for 2002–2013 (130 municipalities). In line with previous literature and the structure of the panel data, the authors use a generalized method of moments equation to the main model and three robustness checks. Findings The results, robust to different specifications, indicate that banks do not take mayors’ corruption as a significant risk component of the municipal solvency. The data show a “corruption premium” ranging from −1 to 33 basis points, which aligns with the size of the “corruption premium” found by the literature, but the significance is low. This finding is connected, on the one hand, with the rigid, thorough Spanish legal framework ruling municipal financial management, and on the other hand, with the characteristics of mayors’ corruption. Robust evidence shows that key financial indicators influence interest rates: current saving, with a strong influence, and level of indebtedness, to a lesser extent. Besides, more populated cities pay lower interest rates. Research limitations/implications The main limitation stems from the calculation of interest rate, because but sharp debt changes may decrease the accuracy. Practical implications The data prove that banks value this surplus as a sign of solvency and set lower interest rates. Considering that this financial indicator is key for setting the interest rate, as a point for practitioners, current saving should be monitored by the municipal financial officer, as a way to reduce the financial cost. Besides, legislation should consider current saving as a benchmark to set balanced budget rules or to establish conditions for municipalities to get into greater indebtedness. Originality/value This is the first research on municipal interest rate premium due to corruption in Spain.

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Does interest rate liberalisation affect the constancy of mean interest rates in China?

Journal of Financial Regulation and Compliance ◽

10.1108/jfrc-10-2019-0129 ◽

2020 ◽

Vol 28 (4) ◽

pp. 555-568

Author(s):

Hui Hong ◽

Zhicun Bian ◽

Naiwei Chen ◽

Chiwei Su

Keyword(s):

Interest Rate ◽

Interest Rates ◽

Structural Breaks ◽

Negative Impact ◽

Financial Reforms ◽

Inflationary Expectation ◽

Content Type ◽

The Mean ◽

The Interest Rate ◽

The Impact

Purpose This paper aims to examine the impact of interest rate liberalisation on the constancy of mean interest rates in China to test the effect of financial reforms and provide strategies for future practices. Design/methodology/approach Bai and Perron’s (1998, 2003) methodology is used to test for structural breaks in the mean of different interest rates using Chinese data, and break dates are measured against the exact dates of the interest rate liberalisation. The performance of mean interest rates across the regimes defined by liberalisation dates is also investigated. Findings The main results show that interest rates generally increase (decrease) after deregulations on lending (deposit) rates, but these changes are not significant to induce a negative impact on the domestic economy. Instead, the infrequent but important shifts (structural breaks) in mean interest rates are caused by factors other than liberalisation such as economic shocks, inflationary expectation and liquidity crunch in China. Originality/value To the best of the author’s knowledge, this paper provides unprecedented evidence on significant changes in interest rates attributable to the liberalisation within the Chinese context.

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THE VARIANCE AND TREND OF INTEREST RATE – CASE OF COMMERCIAL BANKS IN KOSOVO

CBU International Conference Proceedings ◽

10.12955/cbup.v3.577 ◽

2015 ◽

Vol 3 ◽

pp. 007-013

Author(s):

Fidane Spahija

Keyword(s):

Interest Rate ◽

Interest Rates ◽

Commercial Banks ◽

Service Sector ◽

Policy Instrument ◽

Family Economy ◽

Key Issues ◽

Independent Variable ◽

The Interest Rate ◽

The Impact

Today’s debate on the interest rate is characterized by three key issues: the interest rate as a phenomenon, the interest rate as a product of factors (dependent variable), and the interest rate as a policy instrument (independent variable). In this article, the variance in interest rates, as the dependent variable, comes in two statistical sizes: the variance and trend. The interest rates include the price of loans and deposits. The analysis of interest rates on deposits and loan is conducted for non-financial corporation and family economy. This study looks into a statistical analysis, to highlight the variance and trends of interest rates for the period 2004-2013, for deposits and loans in commercial banks in Kosovo. The interest rate is observed at various levels. Is it high, medium or low? Does it explain growth trends, keep constant, or reduce? The trend is observed whether commercial banks maintain, reduce, or increase the interest rate in response to the policy that follows the Central Bank of Kosovo. The data obtained will help to determine the impact of interest rate in the service sector, investment, consumption, and unemployment.

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Research on the Deposit Insurance Pricing Under the Marketing RMB Interest Rate

Applied Finance and Accounting ◽

10.11114/afa.v2i2.1721 ◽

2016 ◽

Vol 2 (2) ◽

pp. 86

Author(s):

Lingyan Sun ◽

Tianning Shi ◽

Panlu Shi

Keyword(s):

Interest Rate ◽

Interest Rates ◽

Deposit Insurance ◽

Insurance Pricing ◽

Insurance System ◽

Functional Representation ◽

Interest Rate Marketization ◽

Deposit Insurance System ◽

The Interest Rate ◽

The Impact

The deposit insurance pricing is the core issue of deposit insurance system, it determines the success or failure of the deposit insurance system in a way. In the current deposit insurance pricing methods, we treat the interest rates as a constant. With the interest rate marketization in China, the deposit insurance pricing methods have also changed accordingly. In this paper, we will give a functional representation of the impact of RMB interest rate marketization on interest rate by fitting the coefficients of the cubic function. Then we will use the data of 2013 to prove it. For the points that do not conform to this rule, we also have some explanations related to the major economic events at that time.

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