scholarly journals Brexit’s Protectionist Policy and Implications for the British Pound

2017 ◽  
Vol 8 (4) ◽  
pp. 7
Author(s):  
Lara Joy Dixon ◽  
Hoje Jo
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Inflation Rate ◽  
Purchase Power Parity ◽  
Spot Rate ◽  
Fisher Effect ◽  
Power Parity ◽  
Macroeconomic Variables ◽  
Inflation Rates

In this paper, we examine the association among the macroeconomic variables - interest rate, inflation rate, unemployment, and the expected spot rate of the British pound with respect to the Euro around the announcement of “Brexit”, June 2016, using the two international parity relationships, Purchase Power Parity (PPP) and International Fisher effect (IFE). We use the two international parity relationships to examine the significance of change in daily interest rates and monthly inflation rates on the change in actual daily spot rates. In addition, we postulate that the protectionist nature of Brexit policy has contributed to lowering U.K. unemployment and prompted wage growth, resulting in higher inflation rates. Our analysis, examining both the magnitude and directional deviation of the actual spot rate compared to the spot rate using the two parity relations, indicate that spot rates predicted based on the PPP and the IFE relations suggest the weakening of the British pound after the Brexit announcement. Furthermore, we find that U.K. unemployment has reduced due to the expanded monetary policy, consistent with the prediction of the Phillip’s curve.

Monetary-Policy Rule as a Bridge: Predicting Inflation without Predictive Regressions

2018 ◽  
Vol 53 (6) ◽  
pp. 2559-2586 ◽  
Author(s):  
Jian Hua ◽  
Liuren Wu
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Historical Analysis ◽  
Policy Rule ◽  
Estimation Errors ◽  
Predictive Regressions ◽  
Inflation Rates ◽  
Monetary Policy Rule ◽  
Out Of Sample

A major issue with predicting inflation rates using predictive regressions is that estimation errors can overwhelm the information content. This article proposes a new approach that uses a monetary-policy rule as a bridge between inflation rates and short-term interest rates and relies on the forward-interest-rate curve to predict future interest-rate movements. The 2-step procedure estimates the predictive relation not through a predictive regression but far more accurately through the contemporaneous monetary-policy linkage. Historical analysis shows that the approach outperforms random walk out of sample by 30%–50% over horizons from 1 to 5 years.

scholarly journals Interest rates and prices causality in the Czech Republic – Granger approach

2009 ◽  
Vol 55 (No. 7) ◽  
pp. 347-356 ◽  
Author(s):  
J. Poměnková ◽  
S. Kapounek
Keyword(s):  
Monetary Policy ◽  
Czech Republic ◽  
Interest Rate ◽  
Interest Rates ◽  
Inflation Rate ◽  
Aggregate Demand ◽  
Real Economy ◽  
Investment Activity ◽  
The Czech Republic ◽  
The Interest Rate

Monetary policy analysis concerns both the assumptions of the transmission mechanism and the direction of causality between the nominal (i.e. the money) and real economy. The traditional channel of monetary policy implementation works via the interest rate changes and their impact on the investment activity and the aggregate demand. Altering the relationship between the aggregate demand and supply then impacts the general price level and hence inflation. Alternatively, the Post-Keynesians postulate money as a residual. In their approach, banks credit in response to the movements in investment activities and demand for money. In this paper, the authors use the VAR (i.e. the vector autoregressive) approach applied to the “Taylor Rule” concept to identify the mechanism and impact of the monetary policy in the small open post-transformation economy of the Czech Republic. The causality (in the Granger sense) between the interest rate and prices in the Czech Republic is then identified. The two alternative modelling approaches are tested. First, there is the standard VAR analysis with the lagged values of interest rate, inflation and economic growth as explanatory variables. This model shows one way causality (in the Granger sense) between the inflation rate and interest rate (i.e. the inflation rate is (Granger) caused by the lagged interest rate). Secondly, the lead (instead of lagged) values of the interest rate, inflation rate and real exchange rate are used. This estimate shows one way causality between the inflation rate and interest rate in the sense that interest rate is caused by the lead (i.e. the expected future) inflation rate. The assumptions based on money as a residual of the economic process were rejected in both models.

scholarly journals Matching NBP interest rates to different versions of the Taylor rule

2019 ◽  
Vol 14 (2) ◽  
pp. 165-177
Author(s):  
Tomasz Grabia
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Economic Crisis ◽  
Real Interest Rate ◽  
Taylor Rule ◽  
Macroeconomic Variables ◽  
The Interest Rate ◽  
Gdp Gap

The interest rate is the basic instrument of monetary policy, directly or indirectly affecting basic macroeconomic variables, such as inflation, unemployment and economic growth. The aim of the article is to compare the NBP reference rate with hypothetical rates calculated on the basis of different variants of the Taylor rule and to indicate which of those variants is best suited to the situation in Poland. The study period of 2000-2017 was adopted for the analysis. On its basis, it was found that in most cases the real interest rate of the central bank in Poland strongly coincided with rates that would have been set if one of the varieties of the Taylor rule had been in force. The best match coincided with the modified version of this rule, which was created after the economic crisis. That means that the NBP took into account both the deviations of inflation from the target and the GDP gap when making decisions regarding interest rates.

scholarly journals Monetary Policy and Domestic Investment in Nigeria: The Role of the Inflation Rate

2020 ◽  
Vol 34 (1) ◽  
pp. 139-155
Author(s):  
Obinna Franklin Ezeibekwe
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Money Supply ◽  
Inflation Rate ◽  
Bank Lending ◽  
Policy Tools ◽  
Open Market ◽  
Domestic Investment ◽  
Inflation Rates ◽  
The Impact

AbstractEconomic theory suggests that monetary policy can be used to stabilize an economy. However, the ability of monetary policy targets—interest rates and money supply—to stabilize an economy depends on their ability to achieve price stability. Using data from 1981 to 2018 and applying the vector error correction model, this paper seeks to determine how the changes in the inflation rate affect the ability of monetary policy tools to stabilize the Nigerian economy and stimulate investment. Empirical results suggest that the impact of the interest rates on investment depends on the level of the inflation rate. The size of the effect of interest rates on investment gets weaker as the inflation rate increases suggesting that monetary policy tools, such as the monetary policy rate (MPR), that directly change the interest rates are robust stabilization tools during periods of declining inflation rates but not relevant during periods of rising inflation rates. This is attributable to low bank lending rates. Additionally, the impact of the money supply target on investment does not depend on the level of the inflation rate. This suggests that monetary policy tools, such as open market operations, that directly change the money supply can be relevant stabilization tools during economic booms and recessions. As a result, the Central Bank of Nigeria should work to deepen the scale, capacity, and efficiency of its open market operations by ensuring that most of the people can participate with minimal transaction cost and by making different financial instruments available.

scholarly journals AN EMPIRICAL STUDY OF THE FISHER EFFECT AND THE DYNAMIC RELATION BETWEEN NOMINAL INTEREST RATE AND INFLATION IN SINGAPORE

2009 ◽  
Vol 54 (01) ◽  
pp. 75-88 ◽  
Author(s):  
KING FUEI LEE
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Inflation Rate ◽  
Nominal Interest Rate ◽  
Impulse Response Functions ◽  
Fisher Effect ◽  
Dynamic Relationship ◽  
Long Run ◽  
Price Puzzle ◽  
Nominal Interest Rates

The Fisher Effect postulated that real interest rate is constant, and that nominal interest rate and expected inflation move one-for-one together. This paper employs Johansen's method to investigate for the existence of a long-run Fisher effect in the Singapore economy over the period 1976 to 2006, and finds evidence of a positive relationship between nominal interest rate and inflation rate while rejecting the notion of a full Fisher Effect. The dynamic relationship between nominal interest rate and inflation rate is also examined from the error-correction models derived, and the analysis is extended to investigate the impulse response functions of inflation and nominal interest rates where we discover the presence of the Price Puzzle in the Singapore market.

scholarly journals Impact of Interest Loan, Growth of Regional Gross Domestic Product, Inflation and Economic Growth on Loans at Credit Union in West Kalimantan, Indonesia

2021 ◽  
Vol 2 (3) ◽  
pp. 37-47
Author(s):  
Maran Maran
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Interest Rates ◽  
Inflation Rate ◽  
Credit Unions ◽  
Credit Union ◽  
Gdp Growth ◽  
Inflation Rates ◽  
Per Capita ◽  
The Impact

 Loans or credits offered by Kopdit credit unions are a potential source of funds that need to be developed, to help accelerate the home industry and the micro and small economies. Therefore, we want to see the impact of several conditions such as the loan interest rate, GDP per capita growth, inflation rate and economic growth. Quite a number of studies have looked at the impact of interest rates, GDP growth, inflation rates and economic growth on loans or credits to banks or banking institutions. We do not look at credit or loans from banks, but on Kopdit credit unions (CU). The results of our research show that simultaneously the loan interest rate, GDP growth, inflation rate and economic growth have a strong enough influence on loans at Credit Union Credit Unions, namely 79.2454%. Partially the variable of loan interest rate, GDP growth per capita, inflation rate affects outstanding loans, while economic growth partially has no effect on outstanding loans.

scholarly journals The Effect of Interest Rate on The Volume of Cash and Pledge Credit in Iraq (2004-2016)

2021 ◽  
pp. 60-70
Author(s):  
هيثم الجنابي ◽  
نجوى كاظم
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Inflation Rate ◽  
Banking System ◽  
Standard Analysis ◽  
Cubic Model ◽  
Independent Variable ◽  
Oil Revenues

The interest price is one of the important tools of monetary policy to affect the financial and economic variables, including cash and pledge credit, with the aim of activating the economic movement in the country. The Central Bank followed a policy of reducing the base interest price until it reached 4.33% in 2016, but this decrease didn't lead to the energizing of cash and pledging credit in a way that leads to the productive sector's advancement, as the Iraqi economy is a rentier economy and oil revenues have acquired a large proportion of the domestic income of Iraq. Also, individuals hoarding their money away from the banking system have made the interest price lose its role in influencing at the credit extant. The research aims to measure the effect of basic interest price changes on the extant of cash and credit through descriptive and standard analysis for the period (2004-2016). The research is based on the hypothesis that weakness of the correlation and significant impact between interest prices and the extant of cash and pledge credit led to weakness the credit of both types in stimulating investment. The research reached a set of conclusions, the most important of which is the existence of a weak relationship and there is no statistically significant effect of the independent variable (interest price) on the dependent variable (cash and pledge credit) and there is an inverse relationship between them, which is consistent with economic theory. The research concluded with a set of recommendations, the most important of which is the activation of the interest price role as one of the monetary policy tools to influence cash and pledge credit, and commercial banks must coordinate and cooperate with the Central Bank of Iraq to study and determine the interest price and review interest rates periodically and continuously. Keywords : Interest rate, cash credit, pledge credit, cash interest rate, real interest rate, inflation rate, linear model and cubic model

scholarly journals ANALISIS PENGARUH JUMLAH UANG BEREDAR, SUKU BUNGA SBI, NILAI TUKAR TERHADAP TINGKAT INFLASI

Media Ekonomi ◽  
2017 ◽  
Vol 18 (2) ◽  
pp. 49
Author(s):  
Heru Perlambang
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Linear Regression ◽  
Exchange Rates ◽  
Interest Rates ◽  
Money Supply ◽  
Inflation Rate ◽  
Test Results ◽  
The Interest Rate

<p>Inflation is one of the effects of a prolonged economic crisis that hit the<br />country. Inflation is a situation where there are price rises sharply (Absolute)<br />which continues over a period of time. The purpose of this study analyzes the<br />monetary policy conducted by Bank Indonesia and its influence as the money<br />supply, interest rates and exchange rates SBI (IDR / USD) of the inflation rate.<br />The method used is multiple linear regression based on test results indicate<br />avariable effect on money supply, interest rate of SBI, and the exchange rate<br />(Rp / USD) in 2004 to 2009. By using eviews 4.0 software obtained from the<br />results of research following the money supply and exchange rate (Rp/USD)<br />had no significant effect on inflation while the interest rate (SBI) have a<br />significant effect on inflation.</p>

Economic effects of monetary policy in Russia: What do large datasets tell us?

2020 ◽  
pp. 31-53 ◽  
Author(s):  
Anna A. Pestova ◽  
Natalia A. Rostova
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Economic Activity ◽  
Global Financial Crisis ◽  
Exchange Rate Regime ◽  
Aggregate Demand ◽  
Economic Effects ◽  
Theoretical Concepts ◽  
Empirical Estimates

Is the Bank of Russia able to control inflation and, at the same time, manage aggregate demand using its interest rate instruments? In other words, are empirical estimates of the effects of monetary policy in Russia consistent with the theoretical concepts and experience of advanced economies? This paper is aimed at addressing these issues. Unlike previous research, we employ “big data” — a large dataset of macroeconomic and financial data — to estimate the effects of monetary policy in Russia. We focus exclusively on the period after the 2008—2009 global financial crisis when the Bank of Russia announced the abandoning of its fixed ruble exchange rate regime and started to gradually transit to an interest rate management. Our estimation results do not confirm standard responses of key economic activity and price variables to tightening of monetary policy. Specifically, our estimates do not reveal a statistically significant restraining effect of the Bank of Russia’s policy of high interest rates on inflation in recent years. At the same time, we find a significant deteriorating effect of the monetary tightening on economic activity indicators: according to our conservative estimates, each of the key rate increases occurred in March and December 2014 had led to a decrease in the industrial production index by about 0.2 percentage points within a year.

Macroeconomic Variables and Private Investment: A Two Dimensional Study from Nigeria Economy

2019 ◽  
pp. 20-37
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Private Equity ◽  
Inflation Rate ◽  
Private Investment ◽  
Financial Deepening ◽  
Equity Investment ◽  
Macroeconomic Variables ◽  
Insignificant Effect ◽  
Real Investment

The study investigated the impact of macroeconomic variables on private investment in Nigeria for the period 1990 to 2016. To achieve these objectives, the study tests for the study modeled private equity and private real investment as the function exchange rate, financial sector development, and interest rate, openness of the economy, real gross domestic product, inflation rate and broad money supply. Ordinary least square method of data analysis was used. From model one, the study found that real gross domestic product have positive but insignificant effect, openness of the economy have positive and insignificant effect, interest rate have positive and significant effect, financial deepening have positive and insignificant effect while interest rate, inflation rate and exchange rate have negative effect on private real investment. The coefficient of determination (R2) proved that the independent variables can explain 62 percent variation on private real investment; the f- statistics found that the model is significant while the Durbin Watson statistics proved the presence of serial autocorrelation. The effect of macroeconomic variables on private equity investment was presented in model two. The study found that openness of the economy; real gross domestic products, broad money supply, and interest rate have negative and insignificant effect on private equity investment except openness of the economy with significant effect. Inflation rate, financial sector deepening and exchange rate have positive and insignificant effect on private equity investment except financial deepening with significant effect. The R2 proved that the independent variables can predict 66.9 percent variation on private equity investment. The f- statistics found that the model is significant while the Durbin Watson statistics proved the presence of serial autocorrelation. We conclude that macroeconomic variable have significant effect on private investment in Nigeria. We recommend that interest rate must be able to encourage higher private investment by increasing the real interstate on private savings or household savings so that larger amount of income would be saved to accumulate more capital and hence private investment. Policies should be formulated by investors and government to discourage factors that affect negatively private investment.

Sign in / Sign up

Export Citation Format

Share Document