The Sensitivity of Interest Rate Options to Monetary Policy Decisions: A Regime-Shift Pricing Approach

2015 ◽  
Vol 36 (1) ◽  
pp. 66-87
Author(s):  
René Ferland ◽  
Geneviève Gauthier ◽  
Simon Lalancette
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Regime Shift ◽  
Policy Decisions ◽  
Interest Rate Options

Monetary Policy and Interest Rate Caps: A Regime-Shift Approach

2012 ◽  
Author(s):  
Genevieve Gauthier ◽  
Simon Lalancette ◽  
René Ferland
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Regime Shift ◽  
Interest Rate Caps

scholarly journals Perspectives From the Past for the Federal Reserve’s Monetary Policy and Communication

2018 ◽  
Vol 10 (1) ◽  
pp. 31
Author(s):  
Arto Kovanen
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Financial Crisis ◽  
Federal Reserve ◽  
Policy Decisions ◽  
Forward Guidance ◽  
Policy Communication ◽  
Communication Practices ◽  
Future Policy ◽  
Future Direction

In this paper we analyze the Federal Reserve’s policy and communication patterns during earlier tightening cycles to gain perspectives into the Federal Reserve’s post-financial crisis monetary policy decisions and communication practices. While each interest rate cycle is unique, as is evident in the post-financial crisis normalization episode, there are regularities that could help inform us about future policy directions. In the post-financial period, the Federal Reserve has placed a great deal of emphasis on policy communication, in particular on its forward guidance, to minimize ambiguity about the future direction of monetary policy. We examine forward guidance during the earlier interest rate cycles and identify some common elements in the Federal Reserve’s communication practices, which would be useful in interpreting the Federal Reserve’s policy actions. This leads us to conclude that it would not be uncharacteristic for the Federal Reserve to suspend its campaign of raising interest rate at this stage of the normalization process, even if inflation risk remains. This underscored the importance of judgment in policy decisions, in part due to uncertainty about the neutral rate of interest, which is a benchmark that the Federal Reserve frequently refers to. In addition, historical trends in economic variables reveal patterns that could assist in evaluating the Federal Reserve’s current and future policy decisions.

Monetary policy surprises and jumps in interest rates: evidence from Brazil

2015 ◽  
Vol 42 (5) ◽  
pp. 893-907
Author(s):  
Roberto Meurer ◽  
André A.P. Santos ◽  
Douglas E. Turatti
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Term Structure ◽  
Asset Price ◽  
Policy Decisions ◽  
Content Type ◽  
Interest Rate Volatility ◽  
Jump Model ◽  
Asset Values

Purpose – The purpose of this paper is to consider a monetary-jump model to measure the contribution of jumps to the total volatility of interest rates in the Brazilian interbank market and to assess the extent to which the central bank’s unanticipated monetary policy decisions are driving these jumps. Design/methodology/approach – The authors use a sample of swap rates contracts with different maturities to estimate a mixture GARCH-jump model that disentangles two components of interest rate volatility: a GARCH-type specification that models conditional heteroskedasticity to account for the volatility during “normal” times and a Poisson process that models the occurrence of abrupt changes in interest rates. Findings – The contribution of jumps to the total volatility is substantial, and monetary policy decisions partly explain the occurrence of those jumps. In particular, the authors find that the likelihood of a jump occurring during a meeting day of the Brazilian central bank’s monetary policy committee (COPOM) is higher in comparison to that of a non-meeting day. Research limitations/implications – The occurrence of jumps in the term structure of interest rates raises the question of the transmission mechanism of the monetary policy through the asset price channel as well as the relation between jumps and economic fundamentals. Practical implications – Communication between the central bank and the market will affect expectations and asset values. If the central bank’s decisions generate fewer jumps, then the variance of the interest rate-linked asset values will also be reduced. Originality/value – The paper employs a new approach to assess monetary policy surprises to a set of Brazilian interest rate data and relates the occurrence of jumps to the macroeconomic environment.

Dampak Kebijakan Moneter Pada Output Di Negara-Negara ASEAN Tahun 1980-2014

2017 ◽  
Vol 4 (1) ◽  
pp. 58-70
Author(s):  
Nur Widiastuti
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Fixed Effects ◽  
Empirical Studies ◽  
Negative Relationship ◽  
Least Square ◽  
Fixed Effects Model ◽  
State Data ◽  
Ordinary Least Square ◽  
The Impact

The Impact of monetary Policy on Ouput is an ambiguous. The results of previous empirical studies indicate that the impact can be a positive or negative relationship. The purpose of this study is to investigate the impact of monetary policy on Output more detail. The variables to estimatate monetery poicy are used state and board interest rate andrate. This research is conducted by Ordinary Least Square or Instrumental Variabel, method for 5 countries ASEAN. The state data are estimated for the period of 1980 – 2014. Based on the results, it can be concluded that the impact of monetary policy on Output shown are varied.Keyword: Monetary Policy, Output, Panel Data, Fixed Effects Model

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.

The Role of Different Channels in Transmitting Monetary Policy into Output and Price in Vietnam

2015 ◽  
pp. 20-40
Author(s):  
Vinh Nguyen Thi Thuy
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Money Supply ◽  
Monetary Transmission ◽  
Impulse Response Functions ◽  
Short Run ◽  
The Exchange Rate ◽  
The Interest Rate ◽  
Interest Rate Channel

The paper investigates the mechanism of monetary transmission in Vietnam through different channels - namely the interest rate channel, the exchange rate channel, the asset channel and the credit channel for the period January 1995 - October 2009. This study applies VAR analysis to evaluate the monetary transmission mechanisms to output and price level. To compare the relative importance of different channels for transmitting monetary policy, the paper estimates the impulse response functions and variance decompositions of variables. The empirical results show that the changes in money supply have a significant impact on output rather than price in the short run. The impacts of money supply on price and output are stronger through the exchange rate and credit channels, but however, are weaker through the interest rate channel. The impacts of monetary policy on output and inflation may be erroneous through the equity price channel because of the lack of an established and well-functioning stock market.

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