scholarly journals An analysis of the Hungarian unsecured interbank market before and after the COVID-19 pandemic

2021 ◽  
Vol 8 (2) ◽  
pp. 193-209
Author(s):  
Ákos Zsolt Bodnár
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Structural Features ◽  
Interbank Market ◽  
Lehman Brothers ◽  
Before And After ◽  
Shock Resistance ◽  
Basic Network

In this article, I examine the structure of the Hungarian unsecured interbank forint market and the change of its network in time between 2019 and 2020, the years before and after the pandemic. I introduce the general characteristics of the market, such as turnover and interest rate, as well as the basic network and structural features. It can be established that, following the COVID-19 pandemic, the unsecured interbank turnover has increased by nearly 30%, which is partly attributable to the liquidity-providing measures taken by the central bank. In March, there was a spike in the interest weighed according to daily turnover, and it had higher level and volatility for the rest of the year 2020 than in 2019. Compared with the period following the bankruptcy of Lehman Brothers, the shock resistance of the unsecured interbank market was much more favourable than in 2020. As far as borrowers are concerned, there was some increase in concentration due to the events, but it was far less significant than during the previous crisis. At the same time, the polarisation of the market became stronger, as there were more participants who provided liquidity than those who absorbed a considerable amount of liquidity. Despite increased liquidity, the aforementioned strong polarisation may have been related to the higher level and the volatility of interest rates in 2020.

Central bank transparency, inflation targeting and monetary policy: a panel data approach

2018 ◽  
Vol 45 (6) ◽  
pp. 1159-1174 ◽  
Author(s):  
Gabriel Caldas Montes ◽  
Cristiane Gea
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Panel Data ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Content Type ◽  
Central Bank Transparency ◽  
Policy Interest

Purpose The evidence concerning the effects of the inflation targeting (IT) regime as well as greater central bank transparency on monetary policy interest rates is not conclusive, and the following questions remain open. What is the effect of adopting IT on both the level and volatility of monetary policy interest rate? Does central bank transparency affect the level of the monetary policy interest rate and its volatility? Are these effects greater in developing countries? The purpose of this paper is to contribute to the literature by answering these questions. Hence, the paper analyzes the effects of IT and central bank transparency on monetary policy. Design/methodology/approach The analysis uses a sample of 48 countries (31 developing) comprising the period between 1998 and 2014. Based on panel data methodology, estimates are made for the full sample, and then for the sample of developing countries. Findings Countries that adopt the IT regime tend to have lower levels of monetary policy interest rates, as well as lower interest rate volatility. The effect of adopting IT on both the level and volatility of the basic interest rate is smaller in developing countries. Besides, countries with more transparent central banks have lower levels of monetary policy interest rates, as well as lower interest rate volatility. In turn, the effect of central bank transparency on both the level and volatility of the basic interest rate is greater in developing countries. Practical implications The study brings important practical implications regarding the influence of both the IT regime and central bank transparency on monetary policy. Originality/value Studies have sought to analyze whether IT and central bank transparency are effective to control inflation. However, few studies analyze the influence of IT and central bank transparency on interest rates. This study differs from the few existing studies since: the analysis is done not only for the effect of transparency on the level of the monetary policy interest rate, but also on its volatility; the central bank transparency index that is used has never been utilized in this sort of analysis; and the study uses panel data methodology, and compares the results between different samples.

Inside the Bank Box

2019 ◽  
pp. 368-405
Author(s):  
Leonardo Gambacorta ◽  
Paul Mizen
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Adjustment Costs ◽  
Bank Lending ◽  
Bank Capital ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Pass Through ◽  
The Interest Rate

Central bank policy operates first through financial markets and then through banks as they adjust their interest rates. This chapter discusses the transmission of policy in this first step of the monetary transmission mechanism, known as interest-rate pass-through. Historically, the focus of attention has been the interest-rate channel. We show the origins of this channel via a microfounded model of interest-rate setting by deposit-taking institutions that are Cournot oligopolists facing adjustment costs. We then examine other channels such as the bank lending channel and the bank capital channel and the role of central bank communications, signaling, and forward guidance over future interest rates. Each is shown to influence the setting of current short-term interest rates. The chapter closes with some issues for the future of pass-through in the transmission process.

scholarly journals The term structure of interest rates and inflation forecast targeting

2011 ◽  
Vol 12 (2) ◽  
pp. 162-179
Author(s):  
Eric Schaling ◽  
Willem Verhagen ◽  
Sylvester Eiffinger
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Term Structure ◽  
Inflation Targeting ◽  
Nominal Interest Rate ◽  
Term Spread ◽  
State Of The Economy ◽  
Output Persistence

This paper examines the implications of the expectations theory of the term structure of interest rates for the implementation of inflation targeting. We show that the responsiveness of the central bank’s instrument to the underlying state of the economy is increasing in the duration of the long-term bond.  On the other hand, an increase in duration will make long-term inflationary expectations - and therefore also the long-term nominal interest rate - less responsive to the state of the economy. The extent to which the central bank is concerned with output stabilisation will exert a moderating influence on the central bank’s response to leading indicators of future inflation. However, the effect of an increase in this parameter on the long-term nominal interest rate turns out to be ambiguous. Next, we show that both the sensitivity of the nominal term spread to economic fundamentals and the extent to which the spread predicts future output, are increasing in the duration of the long bond and the degree of structural output persistence. However, if the central bank becomes relatively less concerned about inflation stabilisation the term spread will be less successful in predicting real economic activity.

scholarly journals The Sensitivity of Central Bank Interest Rate on Commercial Banks’ Stock Market Returns in Kenya

2021 ◽  
Vol 7 (5) ◽  
pp. p72
Author(s):  
Micah Odhiambo Nyamita ◽  
Martine Ogola Dima
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Stock Returns ◽  
Commercial Banks ◽  
Secondary Data ◽  
Market Returns ◽  
Cross Sectional ◽  
Stock Market Returns ◽  
Panel Data Regression

Commercial banks occupy a significant position in the transmission of monetary policy through the financial market. Furthermore, commercial banks have assets and liabilities which are interest rate sensitive, and their stock returns are believed to be particularly responsive to changes in the central bank base lending rates. Therefore, this study investigated the sensitivity of central bank interest rate changes on stock returns of listed commercial banks in Kenya for nine year period, from 2006 to 2014. The study used a hybrid of cross sectional and longitudinal quantitative surveys method, applying GMM panel data regression model on the secondary data from the 11 listed commercial banks in Kenya. The study found out that there is a significant strong positive sensitivity of average annual changes in central bank interest rates (CBR) on the stock returns of the listed commercial banks in Kenya, from 2006 to 2014, measured using CAPM. Hence, listed commercial banks’ managers in Kenya should monitor, keenly, the changes in the central bank interest rates and make investor related decisions accordingly.

scholarly journals FRIENDLY LOAN: A LEGAL STUDY IN MALAYSIA

2021 ◽  
Vol 6 (26) ◽  
pp. 39-47
Author(s):  
Hua Siong Wong
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Financial Institutions ◽  
Financial Services ◽  
Legal Issues ◽  
Legal Study ◽  
Library Research ◽  
Laws And Policies ◽  
The Interest Rate

Financial institutions licensed which were established under the Financial Services Act 2013 and the Moneylenders Act 1951 in Malaysia will provide financial loans at the interest rate charged permitted by-laws and guidelines from the Central Bank of Malaysia to borrowers. However, not all borrowers can afford to pay high and onerous interest rates. Therefore, the law in Malaysia allows for friendly loans, i.e. the lender will provide financial loans assistance to the borrower from of interest or with minimal interest rate. This study will focus on the extent to which the legal issues of the practice of friendly loans in Malaysia and whether the provisions of current laws and policies can protect the interests of both lenders and recipients of friendly loans. This study is qualitative in nature and involves library research. The results of this study will look at aspects of legal issues in order to protect the interests of both lenders and recipients of friendly loans. In fact, Malaysia could also consider creating a special law on friendly loans and regulated by the authorities.

scholarly journals The Effectiveness of the Monetary Transmission Mechanism in Ukraine since the Transition to Inflation Targeting

2019 ◽  
pp. 19-37
Author(s):  
Oleksandr Zholud ◽  
Volodymyr Lepushynskyi ◽  
Sergiy Nikolaychuk
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Monetary Transmission ◽  
Interest Rate Policy ◽  
Leading Role ◽  
The Exchange Rate ◽  
The Interest Rate

This paper analyzes the effectiveness of monetary transmission channels in Ukraine since the National Bank of Ukraine (NBU) transitioned to inflation targeting and after the central bank established its new approach to monetary policy implementation. The authors conclude that the central bank has sufficient control over short-term interest rates in the interbank market and that it uses them to influence other financial market indicators. At the same time, further transmission via the interest rate channel is constrained by weak lending and the banking system’s slow post-crisis recovery. The exchange rate channel remains the most powerful avenue of monetary transmission. After the NBU switched to a floating exchange rate and an active interest rate policy, its key rate became a means of influencing exchange rates. The exchange rate channel’s leading role is expected to gradually decrease but remains important, as is typical for small open economies.

UK central bank divisions over interest rates deepen

2017 ◽  
Keyword(s):  
United Kingdom ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Content Type

Headline UNITED KINGDOM: Bank interest rate divisions deepen

Inflation adds to Brazil’s multiple economic woes

2021 ◽  
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Low Income ◽  
Monetary Policies ◽  
Content Type ◽  
Low Income Families

Significance This is close to the ceiling of the target band of 2.25-5.25% set for this year. In response, the Central Bank last week raised its benchmark interest rate from a record low of 2.00% to 2.75%, the first increase in six years. Impacts Prices that disproportionately affect low-income families are rising faster than overall consumer inflation, increasing inequality. A sooner-than-expected US rate hike would add pressure on Brazil further to increase its own rates. Rising interest rates would hit the economy and make it harder to bring unemployment down. Policymakers will struggle to balance fiscal and monetary policies and the interests of consumers, investors and government.

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.

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