Interest Rates and Macroeconomic Investment under Uncertainty

2021 ◽  
Vol 54 (3) ◽  
pp. 319-345
Author(s):  
Ansgar Belke ◽  
Matthias Göcke
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Central Banks ◽  
Monetary Policy Transmission ◽  
Policy Transmission ◽  
Rate Effects ◽  
Exact Shape ◽  
Micro Level ◽  
The Interest Rate

The interest rate is generally considered as an important driver of macroeconomic investment characterised by a particular form of path dependency, “hysteresis”. At the same time, the interest rate channel is a central ingredient of monetary policy transmission. In this context, we shed light on the issue (which currently is a matter of concern for many central banks) whether uncertainty over future interest rates at the zero lower bound hampers monetary policy transmission. As an innovation we derive the exact shape of the “hysteretic” impact of rate changes on macroeconomic investment under different sorts of uncertainty. Starting with hysteresis effects on the micro level, we apply an adequate aggregation procedure to derive the interest rate effects on a macro level. Our results may serve as a guideline for future central banks’ policies on how to stimulate investment in times of low or even zero interest rates and uncertainty.

Monetary Policy Transmission Mechanism in Romania Over the Period 2001 to 2012

2019 ◽  
pp. 131-145
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Empirical Evidence ◽  
Transmission Mechanism ◽  
Communist Country ◽  
Monetary Policy Transmission ◽  
Policy Transmission ◽  
Emerging Country ◽  
Monetary Policy Transmission Mechanism ◽  
The Interest Rate

This chapter aims to provide additional empirical evidence on monetary policy transmission mechanism in Romania over the period 2001 to 2012 based on a BVAR analysis with a KoKo Minnesota/Litterman prior. The importance of the central bank is rising in Romania considering its main attribution to control the interest rate in accordance with its objectives. The empirical evidence provides a significant contribution to literature taking into account the characteristics of the selected emerging country, i.e. Romania, a former communist country in Central and Eastern Europe.

scholarly journals PERBANDINGAN EFEKTIVITAS MEKANISME TRANSMISI KEBIJAKAN MONETER ANTARA JALUR SUKU BUNGA DENGAN JALUR NILAI TUKAR TERHADAP SASARAN AKHIR INFLASI

Media Ekonomi ◽  
2019 ◽  
Vol 25 (1) ◽  
pp. 1
Author(s):  
Martin Simanjuntak ◽  
Budi Santosa
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Time Lag ◽  
Transmission Mechanism ◽  
Monetary Policy Transmission ◽  
Policy Transmission ◽  
Monetary Policy Transmission Mechanism ◽  
The Interest Rate ◽  
Interest Rate Channel

<em>This result discusses the effectiveness of the transmission mechanism of monetary policy by comparing the interest rate channel with the exchange rate channel towards the final inflation taget. </em><em>This study using regression method Vector Error Correction Model (VECM). In the study of this monetary policy transmission mechanism using secondary data based on monthly time series, namely from January 2011 to December 2015. The data is obtained from Bank Indonesia Financial Economic Statistics (SEKI).</em> <em>From the results of this research, the transmission mechanism of monetary policy exchange rate channel is more effective than monetary policy transmission mechanism interest rate channel; it is proven through the test impulse responses and variance decomposition test. In the exchange rate channel time lag until reach the final target of monetary policy (inflation) is 4 months while for the interest rate channel time lag until reach the final target of monetary policy is 5 months. RPUAB very suitable for use as an operational target in the monetary policy transmission mechanism cause rapid and strong response from RPUAB in responding the shock of monetary policy. RPUAB is the biggest variable that dominates the formation of inflation.</em>

Analisis Efektivitas Kebijakan Moneter Dalam Perspektif Konvensional dan Syariah Terhadap Inflasi di Indonesia Tahun 2013-2020

2021 ◽  
Vol 7 (2) ◽  
Author(s):  
Rindani Dwihapsari ◽  
Mega Rachma Kurniaputri ◽  
Nurul Huda
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Forecast Error ◽  
Impulse Response Function ◽  
Transmission Mechanism ◽  
Average Yield ◽  
Monetary Policy Transmission ◽  
Policy Transmission ◽  
Monetary Policy Transmission Mechanism ◽  
The Interest Rate

This scientific research was conducted to see the effect and how the effectiveness of the monetary policy transmission mechanism from both conventional and sharia perspectives to tackle inflation in 2013-2020. The conventional monetary policy transmission mechanism can be seen from the total conventional bank credit (LOAN), the interest rate on Bank Indonesia Certificates (SBI), and the average yield on Government Securities (SUN). Meanwhile, sharia monetary policy can be seen from the yield rates on Bank Indonesia Sharia Certificates (SBIS), total Islamic bank financing (FINC) and the average yield of State Sharia Securities (SBSN). Through the Vector Error Correction Model method, it is found that the SBI results have a significant negative effect so that if the interest rate increases by one percent it will reduce inflation. Unlike the case with the effectiveness as measured by the Impulse Response Function (IFR) and Forecast Error Variance Decomposition (FEVD), where conventional monetary policy is fast in controlling the inflation rate compared to Islamic monetary policy. However, the magnitude of Islamic monetary policy is greater than conventional monetary policy.

scholarly journals Monetary Policy Transmission under Inflation Targeting in Mongolia

2018 ◽  
Vol 10 (2) ◽  
pp. 1 ◽  
Author(s):  
Erdenechuluun Khishigjargal
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Inflation Targeting ◽  
Transmission Mechanism ◽  
Monetary Policy Transmission ◽  
Rate Transmission ◽  
Policy Transmission ◽  
Monetary Policy Transmission Mechanism ◽  
The Interest Rate

This article aims to examine the monetary policy transmission mechanism under the inflation targeting in Mongolia for the period from June 2007 to August 2017 by applying a recursive vector-autoregressive model. Under the inflation targeting framework, the Bank of Mongolia has established the interest rate corridor since February 2013 for the purpose of improving the interest rate channel of the transmission mechanism. The study then contributes to the literature by assessing whether the interest rate corridor has really improved the policy rate transmission effects by comparing the effects between the pre-corridor period (from June 2007 to February 2013) and the post-corridor period (from March 2013 to August 2017). The main findings of this study are as follows. First, in the post-corridor period the effect of policy rate is clearly transmitted to the lending rate and inflation rate through the responses of interbank market rate, whereas the pre-corridor period does not represent any significant interest rate transmission effects. This outcomes implies that the interest rate corridor has contributed to enhancing monetary policy transmission mechanism. Second, the responses of exchange rate and industrial production to the policy rate shock are not significant even after the adoption of the interest rate corridor. This insignificance might come from the stick policy rate to stabilize the exchange rate, so-called a “fear of floating”.

scholarly journals Transmission Mechanism of Monetary Policy: Case Study of Interest Rate Channel in India

2018 ◽  
Vol 4 (02) ◽  
Author(s):  
Prakash Anant Salvi ◽  
Davinder Kaur Suri
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Real Economy ◽  
Policy Transmission ◽  
Pass Through ◽  
The Interest Rate ◽  
Interest Rate Channel

In India, prior to 1991, the tightly controlled interest rates caused impediments in the functioning of the interest rate channel of monetary policy transmission while after 1991, the RBI undertook various measures to strengthen the market-determination of interest rates. This paper has examined the evolution of the interest channel in India across the period 1985 to 2014 firstly by studying the interest rate pass-through using the Correlation matrix and the OLS technique and secondly, by studying the transmission of policy rates to the real economy using the reduced VAR model. The results show that the transmission of interest rates pass-through from policy rates to market interest rates (both - short-term as well as long-term) has strengthened while desired impact of long term market interest rates on industrial production and inflation appears to be weak.

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