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International Expected Real Interest Rates
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Book Synopsis Testing Real Interest Parity in Emerging Markets by : Manmohan Singh
Download or read book Testing Real Interest Parity in Emerging Markets written by Manmohan Singh and published by International Monetary Fund. This book was released on 2006 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper finds significant deviations between short-term emerging market real interest rates and world real interest rates primarily due to the inflationary expectations of the local investor base. We test for long-run real interest convergence in emerging markets using a time varying panel unit root test proposed by Pesaran to capture the improved macro-economic fundamentals since early 1990s. We also estimate the speed of convergence in the presence of a shock. The paper suggests that real interest rates in the emerging markets show some convergence in the long run but real interest parity does not hold. Our results also find that the speed of adjustment of real rates to a shock is estimated to differ significantly across the emerging markets. Measured by their half-life, some emerging markets in Asia, E.Europe and S.Africa, where real interest rates are generally low, take much longer to adjust than where real interest rates are generally high (Latin America, Turkey). From a policy perspective, encouraging foreign investors to take direct exposure at the short end of the local debt market could lower the real interest rates in some emerging markets.
Book Synopsis Estimating Parameters of Short-Term Real Interest Rate Models by : Mr.Vadim Khramov
Download or read book Estimating Parameters of Short-Term Real Interest Rate Models written by Mr.Vadim Khramov and published by International Monetary Fund. This book was released on 2013-10-17 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper sheds light on a narrow but crucial question in finance: What should be the parameters of a model of the short-term real interest rate? Although models for the nominal interest rate are well studied and estimated, dynamics of the real interest rate are rarely explored. Simple ad hoc processes for the short-term real interest rate are usually assumed as building blocks for more sophisticated models. In this paper, parameters of the real interest rate model are estimated in the broad class of single-factor interest rate diffusion processes on U.S. monthly data. It is shown that the elasticity of interest rate volatility—the relationship between the volatility of changes in the interest rate and its level—plays a crucial role in explaining real interest rate dynamics. The empirical estimates of the elasticity of the real interest rate volatility are found to be about 0.5, much lower than that of the nominal interest rate. These estimates show that the square root process, as in the Cox-Ingersoll-Ross model, provides a good characterization of the short-term real interest rate process.
Book Synopsis Short-term Movements of Long-term Real Interest Rates by : James A. Wilcox
Download or read book Short-term Movements of Long-term Real Interest Rates written by James A. Wilcox and published by . This book was released on 1985 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: The central goverment now issues both nominal and iflation indexed long-term bonds in the United Kingdom. The difference in their yields provides one measure of the long-term expevted rate of inflation. The evidence suggests that higher long-term, expected, real yields are associated with forecasts of higher income, with tigher monetary policy, and with positive aggregate supply shocks. Changes in the short-termgrowth rate of the monbetary base, which presumably capture the so-called liquidity effect on the short-terminterst rates, do not perceptibly alterlong-term real rates. Long-term real rates also appear to be unaffected by the rate of expected inflation. Comparison with nominal interest rate equiation estimates reveals that conclusions about the effect of all variables are extremely sensitive to the choice of a proxy for expected long-term inflation.
Book Synopsis International Expected Real Interest Rates by : John Merrick
Download or read book International Expected Real Interest Rates written by John Merrick and published by . This book was released on 1986 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Correlations Between Real Interest Rates and Output in a Dynamic International Model by : Ms.Jahanara Zaman
Download or read book Correlations Between Real Interest Rates and Output in a Dynamic International Model written by Ms.Jahanara Zaman and published by International Monetary Fund. This book was released on 1998-12-01 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the extent to which a dynamic international general equilibrium model can account for observed movements in real interest rates and interest rate differentials. Using data for Group of Seven, the study finds that measured real interest rates are countercyclical in a single country and that the contemporaneous cross-correlations between international real interest differentials and output growth spreads are negative. Predictions of the baseline model are, however, inconsistent with the data. Extending the benchmark model to include habit persistence in consumption improves the match between theory and data.
Book Synopsis Taxation, Inflation, and Interest Rates by : Mr.Vito Tanzi
Download or read book Taxation, Inflation, and Interest Rates written by Mr.Vito Tanzi and published by International Monetary Fund. This book was released on 1984-06-15 with total page 276 pages. Available in PDF, EPUB and Kindle. Book excerpt: Edited by Vito Tanzi, Director of the IMF's Fiscal Affairs Department, the book consists of nine studies pertaining to monetary-fiscal links in both closed and open economies.
Book Synopsis Is Brazil Different? Risk, Dollarization, and Interest Rates in Emerging Markets by : Edmar L. Bacha
Download or read book Is Brazil Different? Risk, Dollarization, and Interest Rates in Emerging Markets written by Edmar L. Bacha and published by International Monetary Fund. This book was released on 2007-12 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the role of financial dollarization in the determination of real interest rates in emerging economies. In a simple analytical model, we show that a strategy of "dedollarizing" the economy, if it fails to address fundamental macroeconomic risks, leads to higher domestic real interest rates. We confirm this prediction in an empirical model, but find that the effect is small after controlling for the risks of dilution and default. Brazil provides a natural case study given its low degree of financial dollarization and very high real interest rates. The estimated model is unable to explain the high interest rate levels in the aftermath of Brazil's 1994 inflation stabilization. However, since the adoption in 1999 of inflation targeting and floating exchange rates, Brazil's real interest rates are gradually converging to the model's predicted values. The estimation also shows that further drops in Brazil's real interest rates could be achieved more effectively through improvements in fundamentals that lead to investment-grade status rather than through financial dollarization.
Book Synopsis Real Interest Rate Targeting by : Mr.Eric V. Clifton
Download or read book Real Interest Rate Targeting written by Mr.Eric V. Clifton and published by International Monetary Fund. This book was released on 1990-12-01 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines a real interest rate targeting procedure based on lagged inflation similar to the policy followed by the Brazilian monetary authorities during the period November 1986 to December 1988, focusing on the issue of the determinacy of the price level. For the specific model examined, the analysis suggests that such a targeting procedure would not suffer from the frequently noted defect of nominal interest rate targeting rules of leaving the conditional expectation of the next period price level undetermined.
Book Synopsis Are High Real Interest Rates Bad for World Economic Growth? by : Nemat Shafik
Download or read book Are High Real Interest Rates Bad for World Economic Growth? written by Nemat Shafik and published by World Bank Publications. This book was released on 1991 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: The conventional wisdom says yes. But close examination suggests the answer is not nearly so clear-cut.
Book Synopsis Perspectives on Low Global Interest Rates by : Luis Catão
Download or read book Perspectives on Low Global Interest Rates written by Luis Catão and published by International Monetary Fund. This book was released on 2006 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper looks at the dramatic decline in global real interest rates in recent years from a historical perspective and examines the various factors that may account for this trend. We show that current levels of real interest rates on long-term bonds in advanced economies are not low by historical standards and that it is the real long bond rates of the early 1980s through much of the 1990s that look anomalous. We also find that current global long-term interest rates are roughly in line with what one would predict given current price-earnings (P/E) ratios and under reasonable assumptions about the equity risk premia and the expected rate of growth of earnings in advanced countries. Finally, we provide econometric evidence that global long-term interest rates are significantly affected by commodity prices, expected productivity growth, and fiscal consolidation in advanced countries.
Book Synopsis Inflation Expectations by : Peter J. N. Sinclair
Download or read book Inflation Expectations written by Peter J. N. Sinclair and published by Routledge. This book was released on 2009-12-16 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.
Book Synopsis International interest-rate and price-level linkages under flexible exchange rates : a review of recent evidence by : Robert Cumby
Download or read book International interest-rate and price-level linkages under flexible exchange rates : a review of recent evidence written by Robert Cumby and published by . This book was released on 1982 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: "In an open economy, the scope for activist stabilization policy depends on the nature of the linkages between domestic and international markets for goods and assets. Two important relationships--purchasing power parity and uncovered interest-rate parity--have received extensive empirical attention in recent years and are fundamental building blocks of several empirical ex- change rate models. This paper reviews and extends recent econometric findings on these two classical parity relationships and on their corollary, the international equality of expected real interest rates. Econometric tests assuming rationality of expectations are on the whole unfavorable to the classical parity relationships: with few exceptions, they are strongly rejected. A central theme in the review of empirical work is the conditional heteroskedasticity of inflation and exchange rate forecast errors and the bias this statistical problem may impart to tests of inter- national parity relationships. The paper proposes and implements a test for conditional heteroskedasticity which in many cases produces strong evidence that the problem is indeed important"--NBER website.
Book Synopsis The Long-Run Relationship Between Real Exchange Rates and Real Interest Rate Differentials by : Mr.Jun Nagayasu
Download or read book The Long-Run Relationship Between Real Exchange Rates and Real Interest Rate Differentials written by Mr.Jun Nagayasu and published by International Monetary Fund. This book was released on 1999-03-01 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper empirically examines the long-run relationship between real exchange rates and real interest rate differentials over the recent floating exchange rate period, using a panel cointegration method, with data for a set of industrialized countries. The paper finds evidence of statistically significant long-run relationships and plausible point estimates, which contrasts with much existing evidence. The failure of others to establish such relationships may reflect the estimation method they use rather than any inherent deficiency of the fundamentals-based models.
Book Synopsis Globalization, Market Power, and the Natural Interest Rate by : Jean-Marc Natal
Download or read book Globalization, Market Power, and the Natural Interest Rate written by Jean-Marc Natal and published by International Monetary Fund. This book was released on 2019-05-06 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: We argue that strong globalization forces have been an important determinant of global real interest rates over the last five decades, as they have been key drivers of changes in the natural real interest rate—i.e. the interest rate consistent with output at its potential and constant inflation. An important implication of our analysis is that increased competition in goods and labor market since the 1970s can help explain both the large increase in real interest rates up to the mid-1980s and—as globalization forces mature and may even go into reverse, leading to incrementally rising market power—its subsequent and protracted decline accompanied by lower inflation. The analysis has important implications for monetary policy and the optimal pace of normalization.
Book Synopsis Are Ex-post Real Interest Rates a Good Proxy for Ex-ante Real Rates? by : Juan Ayuso
Download or read book Are Ex-post Real Interest Rates a Good Proxy for Ex-ante Real Rates? written by Juan Ayuso and published by . This book was released on 1997 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Trabajo empírico sobre la valoración de activos financieros de acuerdo a un modelo estocástico intertemporal (CCAPM) tomando los datos de cuatro economías distintas: Francia, España, Reino Unido y USA.
Book Synopsis International Macroeconomics in the Wake of the Global Financial Crisis by : Laurent Ferrara
Download or read book International Macroeconomics in the Wake of the Global Financial Crisis written by Laurent Ferrara and published by Springer. This book was released on 2018-06-13 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book collects selected articles addressing several currently debated issues in the field of international macroeconomics. They focus on the role of the central banks in the debate on how to come to terms with the long-term decline in productivity growth, insufficient aggregate demand, high economic uncertainty and growing inequalities following the global financial crisis. Central banks are of considerable importance in this debate since understanding the sluggishness of the recovery process as well as its implications for the natural interest rate are key to assessing output gaps and the monetary policy stance. The authors argue that a more dynamic domestic and external aggregate demand helps to raise the inflation rate, easing the constraint deriving from the zero lower bound and allowing monetary policy to depart from its current ultra-accommodative position. Beyond macroeconomic factors, the book also discusses a supportive financial environment as a precondition for the rebound of global economic activity, stressing that understanding capital flows is a prerequisite for economic-policy decisions.
Book Synopsis Exchange Rate Theory and Practice by : John F. Bilson
Download or read book Exchange Rate Theory and Practice written by John F. Bilson and published by University of Chicago Press. This book was released on 2007-12-01 with total page 542 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume grew out of a National Bureau of Economic Research conference on exchange rates held in Bellagio, Italy, in 1982. In it, the world's most respected international monetary economists discuss three significant new views on the economics of exchange rates - Rudiger Dornbusch's overshooting model, Jacob Frenkel's and Michael Mussa's asset market variants, and Pentti Kouri's current account/portfolio approach. Their papers test these views with evidence from empirical studies and analyze a number of exchange rate policies in use today, including those of the European Monetary System.
