scholarly journals Why House Prices Increase in the COVID-19 Recession: A Five-Country Empirical Study on the Real Interest Rate Hypothesis

Urban Science ◽  
2021 ◽  
Vol 5 (4) ◽  
pp. 77
Author(s):  
Chung Yim Yiu
Keyword(s):  
Economic Growth ◽  
New Zealand ◽  
Interest Rate ◽  
Fixed Effects ◽  
Real Interest Rate ◽  
House Prices ◽  
House Price ◽  
The United States ◽  
Housing Affordability ◽  
The Real

There are substantial rebounds in house prices in many developed economies after the outbreak of COVID-19. It provides a special opportunity to test the real interest rate hypothesis empirically as a “synchronized” price rebound implies a common cause of house price hikes across the economies. This study conducts a panel regression analysis on five economies, namely Australia, Canada, European Union, New Zealand, the United Kingdom, and the United States of America, to test the hypothesis. The data range from 2017Q1 to 2021Q1. The results confirm that the real interest rate imposes a negative and significant effect on house price growth rate after controlling for economic growth factors, unemployment factors, and cross-country fixed effects. The empirical result of the five housing markets shows that a 1% fall in the real interest rate caused a 1.5% increase in house prices, ceteris paribus, in this period. It also provides casual evidence refuting the economic growth hypothesis and the migrant hypothesis in New Zealand. The results provide far-reaching practical implications on housing policy and on the ways forward to solve housing affordability problems.

scholarly journals Government borrowing as a Ponzi scheme: the case of Bangladesh

2021 ◽  
Vol 10 (1) ◽  
pp. 81-86
Author(s):  
Syed Yusuf Saadat
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
Interest Rate ◽  
Real Interest Rate ◽  
Government Debt ◽  
Economic Growth Rate ◽  
The Real ◽  
Ponzi Scheme ◽  
The Government

This study investigates whether government borrowing can be likened to a Ponzi scheme which will allow the government to roll-over its debt perpetually. The results show that, on the basis of the condition of maintaining real economic growth rate above and beyond the real interest rate on government debt, it will not be possible to sustain a perpetual Ponzi scheme of all four types of National Savings Certificates in Bangladesh. The government’s debt may be rolled over perpetually for two types of National Savings Certificates, following the condition outlined in Ball, et al. (1998), or for three types of National Savings Certificates following the condition outlined in Mehrotra (2017). 

scholarly journals THE EFFECT OF MONETARY POLICY ON UNEMPLOYMENT RATE IN INDONESIA

2021 ◽  
Vol 6 (1) ◽  
pp. 1
Author(s):  
Hafiansyah Mahadika ◽  
Wisnu Wibowo
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Unemployment Rate ◽  
Real Interest Rate ◽  
Real Exchange Rates ◽  
Series Data ◽  
The Real ◽  
The Impact

This study aims to determine the influence of monetary policy on the unemployment rate in Indonesia. Unemployment is one of the fundamental problems in the economy. The unemployment problem can be overcome by monetary policy. This study used time series data with the period 1975-2016 using real money demand, economic growth, real interest rates, and real exchange rates as independent variables, and the unemployment rate as the dependent variable. The data used in this study is secondary data obtained from the World Bank. The method used is ARDL (Autoregressive Distributed Lag) which can change a static economic theory to be dynamic by taking into account the role of time explicitly. The results show that in the long run the probability value of the economic growth variable is below the 5% significance level which indicates that economic growth had a negative and significant effect on the unemployment rate. In the short run, the real interest rate, the real interest rate at lag 1, economic growth at lag 1 and lag 3, and the real exchange rate at lag 1 had a negative and significant effect on the unemployment rate. This indicates that the impact of monetary policy on the unemployment rate is temporary.Keywords: Unemployment Rate, Monetary Policy, ARDL.JEL : E24, E52, E61.

scholarly journals Public Debt, Economic Growth and the Real Interest Rate: A Panel VAR Approach to EU and OECD Countries

2019 ◽  
Vol 52 (12) ◽  
pp. 1377-1394 ◽  
Author(s):  
Jan Jacobs ◽  
Kazuo Ogawa ◽  
Elmer Sterken ◽  
Ichiro Tokutsu
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Public Debt ◽  
Real Interest Rate ◽  
Oecd Countries ◽  
Panel Var ◽  
The Real

Boon or Burden? Evaluating the Competing Effects of House-Price Shocks on Regional Entrepreneurship

2021 ◽  
pp. 089124242110410
Author(s):  
Nicholas Kacher ◽  
Luke Petach
Keyword(s):  
Fixed Effects ◽  
House Prices ◽  
House Price ◽  
Housing Affordability ◽  
Capital Gains ◽  
Crowding Out ◽  
Price Shocks ◽  
Price Growth ◽  
Restricted Use ◽  
The Impact

This paper examines the impact of changes in housing affordability on regional entrepreneurship. Two-way fixed-effects estimates suggest an increase in the level of house prices in a commuting zone results in a decline in establishment openings as a share of existing establishments—consistent with a crowding-out effect. In contrast, an increase in the growth rate of house prices results in a small (although not always statistically significant) increase in establishment openings—consistent with a positive wealth effect from capital gains. To address endogeneity concerns, the authors adopt two alternative instruments for commuting zone house-price growth: a measure of local real estate lending and a geography-based measure of the elasticity of local housing supply. They extend the analysis using restricted-use establishment-level microdata from the Quarterly Census of Employment and Wages (QCEW) for the state of Colorado. Results from the QCEW data are consistent with those from the commuting zone sample.

scholarly journals The Rise of Services and Balanced Growth in Theory and Data

2020 ◽  
Vol 12 (4) ◽  
pp. 109-146 ◽  
Author(s):  
Miguel León-Ledesma ◽  
Alessio Moro
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Structural Transformation ◽  
Real Interest Rate ◽  
Marginal Product ◽  
Balanced Growth ◽  
The Real ◽  
Investment Rates ◽  
Cross Country ◽  
Real Investment

We investigate the effect of structural transformation on the process of economic growth. Using a two-sector growth model we show that, in addition to Baumol’s cost disease, structural transformation from goods to services generates other predictions that are in line with cross-country growth facts: an increase in the real investment rate, a decline in the real interest rate and the marginal product of capital, and an acceleration of investment-specific technological change as the share of services increases. The model calibrated to US data can account for the elasticity of real investment rates to the share of services measured in cross-country data. (JEL E22, E23, E43, L16, O33, O41, O47)

scholarly journals Government Expending, Real Interest Rate, and Economic Growth in Nepal

2018 ◽  
Vol 41 (3-4) ◽  
pp. 41-57
Author(s):  
Arbind Chaudhary ◽  
Mahesh Acharya
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Causal Relationship ◽  
Real Interest Rate ◽  
Trade Openness ◽  
Government Expenditure ◽  
Real Income ◽  
The Real ◽  
Long Run ◽  
Average Rainfall

This paper aims to obtain a linear and causal relationship between government expenditure and real interest rate to the economic growth of Nepal for 1975-2015. The applied ARDL cointegration technique yields a long-run association among the variables. Furthermore, the variables: government expenditure, real interest rate, and other control variables-average rainfall and trade openness are established as long-run elements to the national income. The real interest rate has a substitution effect on the Nepalese household sector, hence it hurts the real income. However, trade openness, public expenditure, and average rainfall are recorded as the short-run determinants. Similarly, the study also explores the existence of a bidirectional causal relationship between government expenditure and real income.

scholarly journals LESSONS FROM ARGENTINA’S CURRENCY BOARD SYSTEM FOR INDONESIA

2003 ◽  
Vol 5 (3) ◽  
pp. 122-157
Author(s):  
Agus Fadjar Setiawan
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Interest Rates ◽  
Real Interest Rate ◽  
Inflation Rate ◽  
Nominal Exchange Rate ◽  
Currency Board ◽  
The Real ◽  
The Us ◽  
Board System

The purpose of this study is to attempt to draw lessons from Argentina’s Currency Board System (CBS) for Indonesia. Moreover, this study reviews Argentina’s economic performance before and after the implementation of the CBS, through an examination of some macroeconomic indicators namely real GDP growth, interest rates, money and inflation, as well as fiscal condition. The first three indicators are compared to the US, as the reserve-currency country, and Indonesia. The last indicator is compared to Indonesia only.In summary, the study found that after the adoption of the CBS the economic growth of Argentina substantially improved. The real interest rate tended to converge with the US interest rate, and the inflation rate that is linked to money growth was brought down to a low level close to the US inflation rate. However, this study also produced some more important findings. First, the long-run sustainability of Argentina’s economic growth with its CBS is questionable. Second, the real interest rate convergence was broken due to high default risk and deflationary expectations in Argentina. Third, low inflation later on turned to deflation as a consequence of the overvalued nominal exchange rate. Fourth, lack of sound fiscal policy and weak fiscal performance undermined the CBS regime. Finally, the study suggests that the absence of a lender of last resort is an institutional weakness of the CBS.

scholarly journals An Analysis of the Real Interest Rate Under Regime Shifts

1996 ◽  
Vol 78 (1) ◽  
pp. 111 ◽  
Author(s):  
Rene Garcia ◽  
Pierre Perron
Keyword(s):  
Interest Rate ◽  
Real Interest Rate ◽  
Regime Shifts ◽  
The Real
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