External factors may trigger more Mexican rate hikes

2016 ◽  
Keyword(s):  
Interest Rate ◽  
Current Account ◽  
Federal Reserve ◽  
Rate Increase ◽  
Current Account Deficit ◽  
External Factors ◽  
Content Type ◽  
The Us ◽  
The Interest Rate ◽  
Direct Trade

Significance The hike was double the 25 bp expected by most economists and took place without any similar move from the US Federal Reserve (Fed), increasing the gap between the respective rates to 375 bp. Impacts The interest rate increase will affect growth negatively, with GDP probably growing by around 2% this year. A weak peso should help to maintain the current account deficit at manageable levels. The direct trade impact of Brexit on Mexico will be marginal but any new bilateral deals will be on hold until after UK-EU exit talks.

Further Mexico rate hikes likely in 2018

2017 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Federal Reserve ◽  
Content Type ◽  
The Us ◽  
Wage Increases

Subject Monetary policy moves. Significance The Bank of Mexico (Banxico) increased its target interest rate by 25 basis points, to 7.25%, on December 14, responding to a similar move by the US Federal Reserve (Fed) the previous day. The hike was the first to be taken under new Governor Alejandro Diaz de Leon and pushes the rate to its highest level since March 2009. Impacts Tighter monetary policy will weigh on growth in 2018 and may hit the PRI’s electoral prospects. More expensive credit will hit consumption moderately, as interest rates remain relatively low by historical standards. The possibility of wage increases edging up will feed inflationary expectations.

Indonesia will avoid economic crisis

2018 ◽  
Keyword(s):  
Monetary Policy ◽  
Federal Reserve ◽  
Presidential Election ◽  
Direct Investment ◽  
Current Account Deficit ◽  
Economic Nationalism ◽  
Content Type ◽  
Finance Minister ◽  
Global Trend ◽  
The Us

Subject Indonesia's economic headwinds. Significance Finance Minister Sri Mulyani Indrawati last week said the US Federal Reserve (Fed) should be careful about how its policies affect emerging markets. Tightening US monetary policy and a global trend of trade protectionism is straining Indonesia’s currency and current account deficit. President Joko ‘Jokowi’ Widodo will be eager to demonstrate that he can handle Indonesia’s economic challenges ahead of the presidential election in April 2019. Impacts Sri Mulyani’s message to the Fed is unlikely to have much traction in Washington. The force of economic nationalism will hinder Indonesia’s efforts to court more foreign direct investment. US trade reprisals on Indonesia would damage Washington-Jakarta diplomatic ties.

Any US Fed balance sheet unwinding may be disorderly

2020 ◽  
Keyword(s):  
Financial Markets ◽  
Federal Reserve ◽  
Balance Sheet ◽  
Target Range ◽  
Treasury Bills ◽  
Content Type ◽  
Treasury Securities ◽  
The Us ◽  
Repo Rate ◽  
The Interest Rate

Subject US Federal Reserve policy. Significance The US repurchase agreement (repo) rate, the interest rate on overnight loans backed by Treasury securities to facilitate a range of transactions, suddenly soared above 5% on September 15, 2019. There were immediate effects across financial markets, but the Federal Reserve (Fed) quickly bought up Treasury bills and the repo rate returned to the Fed’s 2.00-2.25% target range. However, concerns linger about whether a spike could recur. The Fed has increased its balance sheet by more than 10% since September but sees this as a temporary adjustment rather than a policy change. Impacts Having narrowed to 3.7 trillion dollars by August 2019, the Fed’s balance sheet could pass its 4.4-trillion-dollar record this year. The Fed will seek to ensure its has enough resources for corporate-tax payment dates but without increasing its holdings indefinitely. Increasing the size of the Fed’s balance sheet could limit the effectiveness of further balance sheet expansion in a future crisis.

IMF bailout would force Pakistan’s Khan to compromise

2018 ◽  
Keyword(s):  
Saudi Arabia ◽  
Welfare State ◽  
Current Account ◽  
Budget Deficit ◽  
Prime Minister ◽  
Current Account Deficit ◽  
Fiscal Year ◽  
Content Type ◽  
The Us ◽  
Us Government

Subject Pakistan's likely need for an IMF bailout. Significance Prime Minister Imran Khan, sworn in earlier this month, came to power promising to create an ‘Islamic welfare state’. In the fiscal year ending June 2018, the current account deficit was nearly 6% of GDP and the budget deficit nearly 7% of GDP. Pakistan in September 2016 completed a three-year Extended Fund Facility programme with the IMF worth some 6.6 billion dollars, and in the last month has availed of loans worth 2.0 billion dollars from China and 4.0 billion dollars from Saudi Arabia. Impacts The US government will issue further warnings against an IMF bailout being used to pay off Pakistan’s debt to China. The revival of ties between Pakistan and Saudi Arabia may hinder Islamabad’s efforts to improve ties with Tehran. Khan’s governing coalition will be relatively stable, fewer constituent parties reducing the risk of splits, and the opposition divided.

Prospects for the US economy to end-2016

2016 ◽  
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Federal Reserve ◽  
Content Type ◽  
Financial Volatility ◽  
Us Economy ◽  
The Us ◽  
The Eu

Subject Prospects for the US economy to end-2016. Significance A disappointing employment report for May, with only 38,000 jobs added, has fuelled speculation that the US economy may be in for a year of slowing economic growth in 2016. The Federal Reserve (Fed)'s decision on June 15 to delay further any interest rate hike only highlights that concern, which now is also exacerbated by the financial volatility induced by the United Kingdom's vote to leave the EU.

Inflation, interest rate and output gap in the US economy: a vine copula modeling

2017 ◽  
Vol 44 (3) ◽  
pp. 412-430
Author(s):  
Osvaldo Candido ◽  
Jose Angelo Divino
Keyword(s):  
Interest Rate ◽  
Conditional Expectation ◽  
Output Gap ◽  
Multivariate Distributions ◽  
Content Type ◽  
Us Economy ◽  
Copula Modeling ◽  
The Us ◽  
The Interest Rate ◽  
Vine Copula

Purpose The purpose of this paper is to investigate the relationship between inflation, interest rate, and output gap in the US economy in the post Second World War period, without assuming any structure nor imposing any restriction on that relationship. Design/methodology/approach The authors apply vine copula modeling to investigate asymmetry and tail behavior on both conditional and unconditional dependence among those variables. The dependence parameter is allowed to evolve over time according to a stochastic autoregressive processes. Additionally, a conditional expectation based on vine copula is used to analyze the conditional expectation of interest rate. Findings The results suggest that the joint distribution, both conditional and unconditional, of the interest rate and inflation is asymmetric to the left, while the pair interest rate and output gap have symmetrical distributions coupled with low persistence and high volatility. Besides the unquestionable evidence that the US monetary policy has been mostly focused on inflation stabilization, there is also indication of nonlinearity in the conditional expected interest rate and asymmetric behavior by the Federal Reserve in the long run. Originality/value The vine copula modeling allows for several forms of asymmetries and tail dependence, which is a flexible modeling strategy for multivariate distributions. Moreover, the conditional expectation implied by vine copulas is suitable to account for nonlinearity in the interest rate conditional on inflation and output gap.

Are export earnings from India’s bilateral intra-industry trade with the US and China robust enough?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sagnik Bagchi ◽  
Surajit Bhattacharyya
Keyword(s):  
Current Account ◽  
Manufacturing Industry ◽  
Current Account Deficit ◽  
Export Price ◽  
World Market ◽  
Export Share ◽  
Content Type ◽  
Persistent Problem ◽  
Industry Trade ◽  
The World

Purpose This paper aims to explore whether India’s export basket in the bilateral intra-industry trade (IIT) with two of its top trading partners characterize robust export earnings or not. This is pertinent for two reasons. First, India has a persistent problem of current account deficit for over decades now. Second, whether India’s export diversification strategy by participating in global value chains to improve export share in the world market led to the problem of the fallacy of composition. Design/methodology/approach This study considers bilateral trade data between India-USA and India-China at the HS-6 digit level over the period 1990–2018. The magnitude of total IIT is computed using the Grubel and Lloyd (1971) index. This paper then uses the unit value dispersion criterion to disentangle the magnitude of total IIT into horizontal and vertical IIT. Through a stepwise econometric exercise, this paper explores the attributes of exported goods in the IIT basket in terms of the directions of ToT, export share and export-price elasticity. Findings Across the two country pairs, the major contributors to the upsurge in IIT are five manufacturing industry groups of chemical, plastics and rubber, textiles, base metals and machinery and mechanical appliances. Across the industry groups, the dominant form of IIT has been low vertical IIT. Most of the industry groups do not characterize robust export earnings as the commodity groups have an elastic demand and an increasing trend of Terms of Trade (ToT). The exceptions are the industry groups of chemicals and textiles in India-China and India-USA, respectively. Research limitations/implications The concern of slim export earnings in most industry groups offers scepticism in maintaining the sustainability of the current account. The problem of the fallacy of composition also cannot be ruled out given the dominance of low vertical IIT. This study argues that these industry groups need to engage in labour market reforms and require access to easy credit to achieve competitiveness in the world market. Originality/value The analysis performed in this paper attempts to integrate the Prebisch-Singer hypothesis in the context of IIT. Empirical evidence to such an issue is not profound.

scholarly journals The impact of Musharakah financing on the monetary policy in the Islamic economy

2018 ◽  
Vol 3 (3/4) ◽  
pp. 139-152
Author(s):  
Hatem Adela
Keyword(s):  
Economic Theory ◽  
Monetary Policy ◽  
Interest Rate ◽  
Economic Activity ◽  
Methodological Framework ◽  
Mathematical Methods ◽  
Content Type ◽  
Return Rates ◽  
The Interest Rate ◽  
The Impact

Purpose This paper aims to contribute to formulating the methodological framework for a paradigm of Islamic economics, using the development of the conventional economics, theoretical and mathematical methods. Design/methodology/approach The study based on the inductive and mathematical methods to contribute to economic theory within the methodological framework for Islamic Economics, by using the return rate of Musharakah rather than the interest rate in influence the economic activity and monetary policy. Findings Via replacement, the concept of the interest rate by the return rates of Musharakah. It concludes that the central bank can control the monetary policy, economic activity and the efficient allocation of resources by using the return rates of Musharakah through the framework of Islamic economy. Practical/implications The study is a contribution to formulate the methodological framework for a paradigm of Islamic economics, where it investigates the impact of return rates of Musharakah on the money market and monetary policy, by the mathematical methods used in the conventional economy. Also, the study illustrates the importance of further studies that examine the methodological framework for Islamic Economics. Originality/value The study aims to contribute to formulating the Islamic economic theory, through the return rate of Musharakah financing instead of the interest rate, and its effectiveness of the monetary policy. As well as reformulating the concepts of the investment function, the present value and the marginal efficiency rate of investment according to the Islamic economy approach.

scholarly journals The impacts of interest rate changes on US Midwest farmland values

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Albulena Basha ◽  
Wendong Zhang ◽  
Chad Hart
Keyword(s):  
Interest Rate ◽  
Great Plains ◽  
Federal Reserve ◽  
State Level ◽  
Land Values ◽  
Federal Funds ◽  
Federal Funds Rate ◽  
Content Type ◽  
Distributed Lag ◽  
Farmland Values

PurposeThis paper quantifies the effects of recent Federal Reserve interest rate changes, specifically recent hikes and cuts in the federal funds rate since 2015, on Midwest farmland values.Design/methodology/approachThe authors apply three autoregressive distributed lag (ARDL) models to a panel data of state-level farmland values from 1963 to 2018 to estimate the dynamic effects of interest rate changes on the US farmland market. We focus on the I-states, Lakes states and Great Plains states. The models in the study capture both short-term and long-term impacts of policy changes on land values.FindingsThe authors find that changes in the federal funds rate have long-lasting impacts on farmland values, as it takes at least a decade for the full effects of an interest rate change to be capitalized in farmland values. The results show that the three recent federal funds rate cuts in 2019 were not sufficient to offset the downward pressures from the 2015–2018 interest rate hikes, but the 2020 cut is. The combined effect of the Federal Reserve's recent interest rate moves on farmland values will be positive for some time starting in 2022.Originality/valueThis paper provides the first empirical quantification of the immediate and long-run impacts of recent Federal Reserve interest rate moves on farmland values. The authors demonstrate the long-lasting repercussions of Federal Reserve's policy choices in the farmland market.

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