Testing the Validity of Taylor's Rule on Developing Countries for Effective Financial Marketing

2020 ◽  
pp. 450-470
Author(s):  
Ali Doğdu ◽  
Gökçe Kurucu ◽  
İhsan Erdem Kayral
Keyword(s):  
Central Bank ◽  
Interest Rates ◽  
Response Function ◽  
Unit Root ◽  
Policy Response ◽  
Short Term ◽  
Monetary Policies ◽  
Inflation Rates ◽  
Augmented Dickey Fuller ◽  
Causality Relationship

This chapter examines whether the central bank policy behaviors of E-7 countries are valid by using a Taylor type monetary policy response function. In this context, the policy response function of banks is analyzed by using monthly data for the 2008-2018 period. Then, unit root tests of ADF (Augmented Dickey Fuller), PP (Philips Perron), IPS (Im Peseran Shin) and LLC (Levin Lin Chu) were performed and analyzed by using Dumitrescu-Hurlin methodology. As a result of the analyses conducted using inflationary data, it was observed that short-term interest rates of the central bank affect price stability by causing inflation, but inflation rates did not cause an increase or decrease in short-term interest rates. According to the findings, although inflation does not cause interest rates to change in E7 countries, a causality relationship has emerged from interest rates to inflation rates. These results indicate that the monetary policies implemented in these countries are not carried out in accordance with the Taylor rule.

scholarly journals Journal of the History of Economic Thought Preprints - Limits to Arbitrage and Interest Rates: A Debate Between Keynes, Hawtrey and Hicks

2018 ◽  
Author(s):  
Lucy BRILLANT
Keyword(s):  
Business Cycle ◽  
Central Bank ◽  
Interest Rates ◽  
Economic Thought ◽  
History Of Economic Thought ◽  
Short Term ◽  
Limits To Arbitrage ◽  
History Of ◽  
The Business Cycle

This paper deals with a debate between Hawtrey, Hicks and Keynes concerning the capacity of the central bank to influence the short-term and the long-term rates of interest. Both Hawtrey and Keynes considered the central bank’s ability to influence short-term rates of interest. However, they do not put the same emphasis on the study of the long-term rates of interest. According to Keynes, long-term rates are influenced by future expected short-term rates (1930, 1936), whereas for Hawtrey (1932, 1937, 1938), long-term rates are more dependent on the business cycle. Short-term rates do not have much effect on long-term rates according to Hawtrey. In 1939, Hicks enters the controversy, giving credit to both Hawtrey’s and Keynes’s theories, and also introducing limits to the operations of arbitrage. He thus presented a nuanced view.

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

Fifteen Years of Central Banking in Honduras

1967 ◽  
Vol 9 (4) ◽  
pp. 488-506 ◽  
Author(s):  
Richard A. LaBarge ◽  
Frank Falero
Keyword(s):  
World War Ii ◽  
Central Bank ◽  
Interest Rates ◽  
Central Banking ◽  
Primary Sources ◽  
World War ◽  
Monetary Policies ◽  
The Public ◽  
History Of ◽  
Commercial Paper

The purpose of this paper is to draw together from primary sources the case history of formative policy years for the Central Bank of Honduras. This bank, like others formed throughout the underdeveloped world in the post-World War II era, was created in 1950 as a vehicle for stimulating economic growth. In retrospect over 186 months of operations this particular Central Bank has an unusually outstanding policy record—a record which argues forcefully for appropriate monetary policy as a stimulant to economic advance.The first meeting of Central Bank directors was held on May 31, 1950, for the purpose of establishing the major monetary policies under which the Bank would commence operations July 1. At that meeting the directors established a schedule of maximum interest rates to be charged by the public commercial banks and a schedule of rates at which eligible commercial paper of 12 months maturity or less could be rediscounted with the Central Bank.

scholarly journals Over- and Underbidding in Central Bank Open Market Operations Conducted as Fixed Rate Tender

2005 ◽  
Vol 6 (1) ◽  
pp. 95-130 ◽  
Author(s):  
Ulrich Bindseil
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Banking System ◽  
Central Banks ◽  
General Question ◽  
Open Market ◽  
Short Term ◽  
Fixed Rate ◽  
Proposed Model

Abstract Open market operations play a key role in allocating central bank funds to the banking system and thereby in steering short-term interest rates in line with the stance of monetary policy. Many central banks apply so-called ‘fixed rate tender’ auctions in their open market operations. This paper presents, on the basis of a survey of central bank experience, a model of bidding in such tenders. In their conduct of fixed rate tenders, many central banks faced specifically an ‘under-’ and an ‘overbidding’ problem. These phenomena are revisited in the light of the proposed model, and the more general question of the optimal tender procedure and allotment policy of central banks is addressed.

Chapter II. The World Economy

1989 ◽  
Vol 129 ◽  
pp. 22-37
Author(s):  
R.J. Barrell ◽  
Andrew Gurney
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
World Economy ◽  
Commodity Prices ◽  
Oil Prices ◽  
Policy Response ◽  
Recent Interest ◽  
Inflation Rates ◽  
The World

Our recent forecasts have warned of growing inflationary pressures in the world economy. The policy response to these has been robust, and interest rates have risen markedly over the last year; consequently there are now signs that inflationary pressures are receding. Chart 1 illustrates the recent interest-rate developments, and chart 2 recent and prospective inflation rates for the major 4 economies. Oil prices have weakened over the last three months, and commodity prices, especially those for metals and minerals, have been falling.

LIMITS TO ARBITRAGE AND INTEREST RATES: A DEBATE AMONG KEYNES, HAWTREY, AND HICKS

2018 ◽  
Vol 40 (3) ◽  
pp. 335-351 ◽  
Author(s):  
Lucy Brillant
Keyword(s):  
Business Cycle ◽  
Central Bank ◽  
Interest Rates ◽  
Short Term ◽  
John Maynard Keynes ◽  
Limits To Arbitrage ◽  
The Business Cycle

This paper deals with a debate among Ralph George Hawtrey, John Richard Hicks, and John Maynard Keynes concerning the capacity of the central bank to influence the short-term and the long-term rates of interest. Both Hawtrey and Keynes considered the central bank’s ability to influence short-term rates of interest. However, they do not put the same emphasis on the study of the long-term rates of interest. According to Keynes, long-term rates are influenced by future expected short-term rates (1930, 1936), whereas for Hawtrey ([1932] 1962, 1937, 1938), long-term rates are more dependent on the business cycle. Short-term rates do not have much effect on long-term rates, according to Hawtrey. In 1939, Hicks enters the controversy, giving credit to both Hawtrey’s and Keynes’s theories, and also introducing limits to the operations of arbitrage. He thus presented a nuanced view.

scholarly journals An empirical analysis of long-term Brazilian interest rates

PLoS ONE ◽  
2021 ◽  
Vol 16 (9) ◽  
pp. e0257313
Author(s):  
Tanweer Akram ◽  
Syed Al-Helal Uddin
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Policy Implications ◽  
Government Bond ◽  
Short Term ◽  
Monetary Policies ◽  
Government Bonds ◽  
Macroeconomic Variables ◽  
Brazilian Government

This paper empirically models the dynamics of Brazilian government bond (BGB) yields based on monthly macroeconomic data, in the context of the evolution of the key macroeconomic variables in Brazil. The results show that the current short-term interest rate has a decisive influence on the long-term interest rate on BGBs, after controlling for various key macroeconomic variables, such as inflation and industrial production. These findings support John Maynard Keynes’s claim that the central bank’s actions influence the long-term interest rate on government bonds mainly through the current short-term interest rate. These findings have important policy implications for Brazil. This paper relates the findings of the estimated models to ongoing debates in fiscal and monetary policies.

The Issue of Logistics and Its Correlation to Economic Growth in Turkey

2021 ◽  
Vol 11 (1) ◽  
pp. 66-80
Author(s):  
Berrak Erkumru Can ◽  
Dilek Temiz Dinç ◽  
Aytaç Gökmen
Keyword(s):  
Economic Growth ◽  
Unit Root ◽  
Unit Root Tests ◽  
Short Term ◽  
Turkish Republic ◽  
Goods And Services ◽  
Augmented Dickey Fuller

Logistics is a considerable issue for the development of a state and its economy. Logistics is involved the forward and backward flows of goods and services from the point of production and point of consumption, and it is considerable for the development of the economy of a country. Yet, the aim of this paper is to review the correlation between the logistics sector of the Turkish Republic and its correlation to economic growth by employing Augmented Dickey Fuller-ADF, Phillips-Perron (PP), Kwiatkowski, Phillips, Schmidt, Shin (KPSS), Elliott, Rothenberg and Stock Point Optimal, and Ng-Perron unit root tests. As a result, there is a bidirectional positive causality between logistics sector and economic growth in the long-term, but there is no causality for short term. Moreover, the novelty of this paper is that it is the most up-to-date study to research logistics and its correlation to economics in Turkey.

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.

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