scholarly journals The Interest Rate Sensitivity of Investment

2019 ◽  
Vol 52 (2) ◽  
pp. 173-190
Author(s):  
Guido Baldi ◽  
Alexander Lange
Keyword(s):  
United States ◽  
Interest Rate ◽  
Rate Sensitivity ◽  
The United States ◽  
Jel Classification ◽  
Short Term ◽  
Vector Autoregressive ◽  
The Interest Rate ◽  
European Economies ◽  
Interest Rate Shock

Abstract The interest rate sensitivity of investment has often played an important role in macroeconomic models. However, many vector autoregressive (VAR) models do not include investment to the list of variables. In this paper, we empirically investigate the size and the evolution of the interest rate sensitivity of investment for the United States and the four largest European economies in the last few decades. We use a VAR model with four variables at quarterly frequency: real investment, real gross domestic product (GDP), inflation, and a measure of the short-term interest rate. In our VAR, the structural interest rate shock is identified under the assumption that macroeconomic quantities and inflation react to interest rate innovations with a lag. We test the appropriateness of this specification by comparing our approach with the identification of shocks derived from the changes in volatility approach. For the countries under consideration, we determine a date during either the 1980s or the 1990s where the interest rate sensitivity of investment began to decrease and became less responsive to monetary policy. In addition, we find that the interest rate sensitivity of investment has been higher in the United States than in Europe, particularly in the first subperiod. Zusammenfassung Die Zinssensitivität der Investitionen spielt oft eine große Rolle in theoretischen makroökonomischen Modellen. In dieser Studie untersuchen wir empirisch die Höhe und die zeitliche Änderung der Zinssensitivität der Investitionen für die Vereinigten Staaten und die vier größten europäischen Volkswirtschaften. Wir verwenden ein VAR-Modell mit vier Variablen: reale Investitionen, reales Bruttoinlandsprodukt, Inflation und kurzfristige Zinsen. In unserem VAR identifizieren wir den strukturellen Schock unter der Annahme, dass die realen makroökonomischen Variablen verzögert auf einen Zinsschock reagieren. Wir testen die Angemessenheit dieser Spezifikation, indem wir unsere Vorgehensweise mit der Identifikation durch den “changes in volatility approach” vergleichen. Wir finden heraus, dass entweder in den 1980er oder frühen 1990er Jahren ein Strukturbruch stattgefunden und sich die Zinssensitivität der Investitionen verringert hat. Interessanterweise zeigen unsere Resultate zudem, dass die Zinssensitivität der Investitionen in den Vereinigten Staaten höher gewesen ist als in den untersuchten europäischen Ländern – insbesondere bis in die 1980er Jahre. JEL Classification: E22, E43, E52

scholarly journals Low interest rates and executive risk-taking incentives: Evidence from the United States

2020 ◽  
pp. 234094442092771
Author(s):  
Paula Castro ◽  
Maria T Tascon ◽  
Francisco J Castaño ◽  
Borja Amor-Tapia
Keyword(s):  
United States ◽  
Interest Rates ◽  
Risk Taking ◽  
The United States ◽  
Jel Classification ◽  
Short Term ◽  
Monetary Policies ◽  
Stock Return Volatility ◽  
Low Interest Rates ◽  
Institutional Shareholders

This article contributes to the literature by indicating how certain monetary policies impact the compensation incentives of US managers to adopt riskier business policies. Specifically, based on the agency problems between shareholders and managers and between shareholders and creditors, a research framework is developed to identify the influence of low interest rates on managers’ risk-taking incentives proxied by the sensitivity of executive compensation to stock return volatility (Vega). We examine 1,293 firms in the United States between 2000 and 2016, and the results indicate that low interest rates increase the managers’ short-term risk-taking incentives and that those incentives contribute to the risk effectively taken by the firm. Our results are robust to the use of alternative monetary proxies and to the presence of passive versus active institutional shareholders. JEL CLASSIFICATION E41; E43; E51; M12; M52

scholarly journals Was the New Deal Contractionary?

2012 ◽  
Vol 102 (1) ◽  
pp. 524-555 ◽  
Author(s):  
Gauti B Eggertsson
Keyword(s):  
United States ◽  
Interest Rate ◽  
Interest Rates ◽  
New Deal ◽  
The United States ◽  
Government Policies ◽  
Short Term ◽  
The Great Depression ◽  
Zero Bound ◽  
The New Deal

Can government policies that increase the monopoly power of firms and the militancy of unions increase output? This paper shows that the answer is yes under certain “emergency” conditions. These emergency conditions—zero interest rates and deflation—were satisfied during the Great Depression in the United States. The New Deal, which facilitated monopolies and union militancy, was therefore expansionary in the model presented. This conclusion is contrary to a large previous literature. The main reason for this divergence is that this paper incorporates rigid prices and the zero bound on the short-term interest rate. JEL: E23, E32, E52, E62, J51, N12, N42

Over-indebtedness of Russians: Myth or reality?

2018 ◽  
pp. 85-104 ◽  
Author(s):  
O. E. Kuzina ◽  
N. A. Krupenskiy
Keyword(s):  
United States ◽  
Interest Rate ◽  
The United States ◽  
Short Term ◽  
High Interest Rate ◽  
Consumer Loans ◽  
The Family ◽  
The World ◽  
Short Time

The main objective of the study is to assess the level of indebtedness and over-indebtedness of Russians. Despite the fact that according to official statistics, the level of household indebtedness in Russia is one of the lowest in the world, the percentage share of non-performing loans is higher than in the countries with a higher level of household indebtedness. During 2015—2017, every fourth of those who had an outstanding loan in Russia spent more than 30% of his or her income on paying back a loan. The reason is that in Russia, within retail lending consumer loans prevail over mortgages. Consumer loans are taken for a short time and at a high interest rate. As a result, debt service of relatively small loans creates a greater burden on the family budget for Russians than in Europe and the United States. In this context, the increase of retail lending can only be sustainable if banks change their business model and transit from short-term consumer credits to long-term loans secured by real estate or other assets.

scholarly journals Economic Power Comparison between United States and China in the Context of Covid-19 Pandemic: Based on Statistical Methods

2021 ◽  
Vol 233 ◽  
pp. 01163
Author(s):  
Yutong Yang
Keyword(s):  
United States ◽  
Interest Rate ◽  
Production Capacity ◽  
The United States ◽  
Consumer Products ◽  
Power Comparison ◽  
Us Economy ◽  
Industrial Chain ◽  
Difficult Time ◽  
The Interest Rate

Generally speaking, economic crises are caused by insufficient demand, while the economic crisis that may be caused by the Covid-19 epidemic started with insufficient supply. In the case of insufficient demand, countries often use a series of monetary policies to release liquidity, such as interest rate cuts, RRR cuts. However, the interest rate cut this time may not work well. This is because the interest rate cut can increase the liquidity of the market.While controlling the epidemic, we should promptly resume work and production, and produce a variety of commodities that meet consumer demand. During this period of time, the main strategy is not monetary policy. Instead, appropriate fiscal policies should be used to reduce the burden on enterprises so that they can survive this difficult time without dying before they start their careers. Only companies that can survive the epidemic are good companies that have combat effectiveness and can continue to conquer the market after the epidemic is over.Therefore, in the face of the Covid-19 epidemic, the competition between China and the United States should not be a zero-sum game because the United States is the final consumer of a large number of products produced by China, and the United States is still the world’s leader. If the US economy declines, it will definitely affect global economic development. When necessary, we also need to support the production of high-end consumer products in the United States and allocate a portion of the production capacity for them. Only when the two sides have healthy competition can the industrial chain of both sides be upgraded together.

scholarly journals Assessing the Role of Money versus Interest Rate in Pakistan

2020 ◽  
Vol 59 (1) ◽  
pp. 101-114
Author(s):  
Zafar Hayat ◽  
Muhammad Nadim Hanif
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Relative Effectiveness ◽  
Policy Instruments ◽  
Jel Classification ◽  
Short Term ◽  
Price Puzzle ◽  
The Interest Rate ◽  
The Impact

We have empirically examined the role of monetary aggregate(s) vis-à-vis short-term interest rate as monetary policy instruments, and the impact of State Bank of Pakistan’s transformation into the latter on their relative effectiveness in terms of inflation in Pakistan. Using indicators of ‘persistent changes’ in the underlying behaviours of variables of interest, we found that broad money consistently explains inflation in (i) monetary (ii) transitory and (iii) interest rate regimes. Though its role has receded while moving from the transition to the interest rate regime, the interest rate instrument seems to be positively related to inflation, a phenomenon commonly known as price puzzle. In light of these findings, we recommend that the role of money should not be completely de-emphasised. JEL Classification: E31, E52. Keywords: Monetary Policy Instruments, Price Puzzle, ARDL, Pakistan

scholarly journals WHAT IS THE RELATIONSHIP BETWEEN THE RATES OF INTEREST AND PROFIT? AN EMPIRICAL NOTE FOR THE U.S. ECONOMY, 1869-2009

2013 ◽  
Vol 71 (280) ◽  
Author(s):  
Alejandro Valle Baeza ◽  
Ivan Mendieta Muñoz
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
The United States ◽  
Short Term ◽  
The Real ◽  
United States Economy ◽  
Empirical Note ◽  
The Interest Rate ◽  
Rate Of Profit

The current paper aims to contribute to the study of the relation between the interest rate and the rate of profit by presenting an empirical analysis of the United States economy during the period of 1869 to 2009. The main findings rendered are: 1) the general rate of profit has set an upper limit for the real short-term and long-term interest rates; 2) the real long-term interest rate has undergone similar changes to those of the general rate of profit, whereas the real short-term interest rate has experienced movements opposite to the latter; and 3) evidence supports heterodox theories which stress that monetary policy affects the distribution of income through the modification of the rate of profit.

scholarly journals THEORETICAL ASPECTS OF DETERMINING THE INTEREST RATE IN THE TRANSFORMATION OF MONETARY POLICY

2021 ◽  
Vol 10 (34) ◽  
Author(s):  
T.A GORBACHEVA ◽  
◽  
T.N BARKOVA ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Time Lag ◽  
The United States ◽  
Short Term ◽  
Interest Rate Policy ◽  
The United Kingdom ◽  
Number Of Factors ◽  
The Interest Rate

Modern practice of macroeconomic management is based on the regulation of money supply through the management of interest rates, mainly short-term. Short-term interest rate management is a Central approach to implementing monetary policy in countries such as the United States, the United Kingdom, and the Euro area. By changing the interest rates on operations of providing or absorbing liquidity, the national Central Bank has a significant impact on the level of interest rates for the same period in the money market. Consequently, the structure of all short-term rates changes for a longer period. Depending on a number of factors, including the exchange rate and the expected level of inflation, the structure of long-term interest rates also changes. Each change occurs with a certain time lag. Changes in interest rates affect the savings and investment decisions of households and firms. The purpose of this article is to study the transformation of the concept of interest and the development of interest rate theories. There are used methods of critical and comparative analysis, a systematic approach to the study of information. The theoretical aspects of determining the interest rate in the development of monetary policy are systematized. The main approaches to the development of interest rate policy in the framework of monetary regulation are studied. The obtained theoretical results can be used in the formation and adjustment of monetary policy.

Cultural Awareness of Students in Communication Sciences and Disorders: A Mixed-Methods Study

2020 ◽  
Vol 5 (5) ◽  
pp. 1231-1242
Author(s):  
Celeste Domsch ◽  
Lori Stiritz ◽  
Jay Huff
Keyword(s):  
United States ◽  
Study Abroad ◽  
Cultural Awareness ◽  
Qualitative Data ◽  
The United States ◽  
Self Report ◽  
Global Awareness ◽  
Short Term ◽  
Term Study ◽  
Short Term Study

Purpose This study used a mixed-methods design to assess changes in students' cultural awareness during and following a short-term study abroad. Method Thirty-six undergraduate and graduate students participated in a 2-week study abroad to England during the summers of 2016 and 2017. Quantitative data were collected using standardized self-report measures administered prior to departure and after returning to the United States and were analyzed using paired-samples t tests. Qualitative data were collected in the form of daily journal reflections during the trip and interviews after returning to the United States and analyzed using phenomenological methods. Results No statistically significant changes were evident on any standardized self-report measures once corrections for multiple t tests were applied. In addition, a ceiling effect was found on one measure. On the qualitative measures, themes from student transcripts included increased global awareness and a sense of personal growth. Conclusions Measuring cultural awareness poses many challenges. One is that social desirability bias may influence responses. A second is that current measures of cultural competence may exhibit ceiling or floor effects. Analysis of qualitative data may be more useful in examining effects of participation in a short-term study abroad, which appears to result in decreased ethnocentrism and increased global awareness in communication sciences and disorders students. Future work may wish to consider the long-term effects of participation in a study abroad for emerging professionals in the field.

The Future of Muslim Education in the United States: An Agenda for Research

2003 ◽  
Vol 20 (3-4) ◽  
pp. 46-82
Author(s):  
Fathi Malkawi
Keyword(s):  
United States ◽  
The United States ◽  
American Education ◽  
Future Trends ◽  
Muslim Community ◽  
Short Term ◽  
The Future ◽  
Muslim Education ◽  
Future Plans

This paper addresses some of the Muslim community’s concerns regarding its children’s education and reflects upon how education has shaped the position of other communities in American history. It argues that the future of Muslim education will be influenced directly by the present realities and future trends within American education in general, and, more importantly, by the well-calculated and informed short-term and long-term decisions and future plans taken by the Muslim community. The paper identifies some areas in which a wellestablished knowledge base is critical to making decisions, and calls for serious research to be undertaken to furnish this base.

“Of Sound Mind and Body”

2019 ◽  
pp. 64-86
Author(s):  
Frank E. Vandervort ◽  
Vincent J. Palusci
Keyword(s):  
United States ◽  
Substance Abuse ◽  
Social Problem ◽  
Drug Testing ◽  
The United States ◽  
Developmental Trajectory ◽  
Prenatally Exposed ◽  
Short Term ◽  
Mind And Body ◽  
Sound Mind

Substance abuse is a major medical and social problem. Estimates suggest that each year some 15 percent of the 4 million babies born in the United States are exposed to drugs or alcohol. Research demonstrates that exposure to these substances is harmful to the children in both the short term and across their developmental trajectory. This chapter summarizes the harms that might result from such prenatal exposure and considers the ways that both federal and state law respond to this. The chapter argues for universal drug testing of newborns in an effort to ascertain whether they have been prenatally exposed to such substances so that treatment and other services can be provided.

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