real interest rate

Russian monetary policy has failed persistently to achieve sustained low inflation, both in absolute terms and relative to the peer group of countries similarly exiting from Soviet-style central planning. This paper explores the reasons for this state of affairs by analysing the kind of monetary policy that has been pursued by the central bank during the period 1995 to 2009. Our contribution is to search for a possible transmission channel between the real interest rate, inflation rate, exchange rate, output growth and foreign reserve growth, after having controlled for the effect of oil price inflation. Using a vector autoregressive model in error-correction form and using sign restrictions methodology, we show that the monetary authorities' failure to abate double-digit inflation appears to be driven by the policy of exchange rate targeting, as reflected in our identified exchange rate shocks.

This study discusses the trend in Nigerian saving behaviour and reviews policy options to increase domestic saving. It also examines the determinants of private saving in Nigeria during the 1970-2007 period. It makes an important contribution to literature by evaluating the magnitude and direction of the effects of the following key policy and non-policy variables on private saving: Income growth,

After a contractionary monetary policy shock, aggregate output decreases over time with a trough after a year and a half, while the real interest rate increases immediately, and remains high for about three quarters. A central step in the explanation is obtaining a persistent increase in the real interest rate, holding aggregate output constant. I study an endowment economy with segmented markets, where, as in the U.S. economy, monetary policy is set in terms of a short-term nominal interest rate, and I show that the real interest rate increases sizeably for up to one year. The shock has a liquidity effect, moving money and interest rates in opposite directions. The endogenous processes for the money growth rate and the real interest rate are strongly serially correlated and close to their empirical counterparts. The more segmented are markets, the stronger and more persistent are the effects of monetary policy shocks, and the higher is the serial correlation of the processes for th...

The primary purpose of this paper is to explore the long-run association among growths in US housing starts, real consumer debt, real GDP and the long-term real interest rate. To carry out this exploratory work, Johansen and Juselius (1990) vector cointegration ...

PurposeThis study seeks to investigate the sensitivity of stock returns at the industry level to market, exchange rate and interest rate shocks in the four major European economies: France, Germany, Italy, and the UK.Design/methodology/approachThe paper utilises the methodology of Campbell and Mei (1993) to decompose systematic risks into components attributable to news about future dividends (cash flows), real interest rates and excess returns.FindingsIn addition to significant market risk, the paper finds significant levels of exposure to exchange rate risk in industries in all four markets. Significant levels of interest rate risk are only identified in Germany and France. All three sources of risk contain significant information about future cash flows and excess returns.Research limitations/implicationsFuture research could investigate the extent of exposure in other markets, or investigate whether the findings change at the firm level. Additionally it could be investigated whe...

Thanks are due to Laurence Ball, Robert Barsky, Ben Bernanke, Michael Bordo, Robert Cumby, Paul Evans, James Hamilton, Nelson Mark, Frederic Mishkin, Peter Teinin, Paul Wachtel and seminar participants at the University of South Carolina and at the NBER Workshop ...

According to consumer price measures like the CPI, inflation has recently jumped up a notch. What those measures don’t tell us is whether the increase will persist. In this Commentary, we look at a measure that does. The measure incorporates data on past inflation rates, surveys of expected inflation, inflation swaps, and a variety of interest rates. It provides estimates of inflation, along with expected inflation and real interest rates. A look at the measure’s estimates suggests that the recent increases in inflation are likely to be temporary.

Economic growth rates vary dramatically across countries over long period of time creating big differences in the standard of leaving of its residents. Using the general framework developed by Barro on a panel date for more than 150 countries with observations computed 5 years, 10 years, 20 years, 40 years period, and annually, during 1961-2000, we found that economic growth is positively correlated with a higher level of health and education, and an increase in: savings, openness of the economy, development of the financial system, capital formation, FDI, and real interest rate. Therewith economic growth is negatively correlated with a higher level of GDP per capita, and an increase in: government consumption, inflation rate, budget deficit, fertility and population growth, unemployment, and current account deficit. In this framework, the evolution and the perspectives of the Romanian growth determinants is mainly positive, although its competitiveness has to grow in order to overc...

The premise of this paper is that in a monetary production economy, policy decisions of the central bank, or more generally the ‘monetary authority’, set the tone not only for nominal interest rates but also for ‘real’ interest rates defined in the usual way. This is a different question than that of which institution(s) acquire the status of monetary authority at any particular stage of socioeconomic or technological development. Rather the suggestion is that the existence of some such social structure is a prerequisite if anything resembling capitalist monetary production is to be viable. The paper demonstrates that a coherent macroeconomic theory can be elaborated on this basis, including an explanation of economic growth, the business cycle, inflation, the functional distribution of income, the ‘Keynesian’ problem of the impact of demand growth on economic growth, endogenous money, cumulative causation, and endogenous technical change.

This study provides some evidences showing high degree of financial integration from both evidences of common shocks and real interest parity in the context of two small and open economies, that is, Malaysia and Singapore. Few key policy implications may be ...

The last decade has been an eventful period for the economy and people of Russia. Although modernisation of the soviet system was on the agenda in the early 1980s, the political and economic reforms did not begin in earnest until 1985, when Mikhail Gorbachev announced the programme known as perestroika. For the first time, individuals were allowed to start their own small private businesses, encouraging the development of entrepreneurial skills and an embryonic market economy. However, these changes had a limited impact: ...

This study aims to shed light on the Feldstein-Horioka (F-H) puzzle, making use of the potential explanations put forward in the related literature. To this end, the study takes a distinct empirical route, combining a cointegration technique and regression analysis. In the first step, we obtain three definitions for the dependent variable that represent the degree of the interaction between domestic saving and investment (S-I), employing a cointegration analysis for 86 countries in the sample. In the second step, each definition of the dependent variable is regressed on potential explanations for the co-movement of the S-I such as openness, country size, productivity shocks, and real interest rate differentials. After examining a number of potential variables for their explanatory power on this puzzle, however, none of the posited variables are found to be statistically significant determinants of the S-I interaction. The results indicate that the size of the economy, productivity s...

In this paper, we study the interaction between monetary and fiscal policies within the framework of a model with non-Ricardian consumer and capital accumulation. Taking into account the presence of wealth effects and the respect of a lower bound on the nominal interest rate makes the global dynamics of the economy very complex, despite the simplicity of the monetary and fiscal policies chosen. We can notably observe the coexistence of the four types of equilibria described by Leeper (1991) in one of the founder articles of the "Fiscal Theory of the Price Level", but for a unique set of the economic policy parameters. We show in particular that a liquidity trap equilibrium, which is also characterized by a high real interest rate and a high public debt-to-GDP ratio, owns the usually required properties for determination, as well as the more traditional equilibrium targeted by the monetary and fiscal authorities. The model is calibrated based on annual data and assesses the...

This study investigated the determinants of bank savings in Nigeria as well as examined the impact of bank savings and bank credits on Nigeria’s economic growth from 1970- 2006. We adopted two impact models; Distributed Lag-Error Correction Model (DL-ECM) and Distributed Model. The empirical results showed a positive influence of values of GDP per capita (PCY), Financial Deepening (FSD), Interest

The purpose of this paper is to analyse the decline in private investment and formulate a comprehensive strategy to overcome this problem, which is the main cause of deceleration in the growth momentum of Pakistan's economy. Due to lack of investor confidence, private investment has ...

Monetary transmission mechanism (MTM) is an illuminating policy tool in appreciating the monetary policy implementations by policy makers upon various nominal and real factors of interest in the eyes of economic agents. Especially in an open economy such as Turkish economy highly exposed to the effects of capital flows on domestic business cycles with a liberalised capital account, control over