scholarly journals Equilibrium Yield Curves and the Interest Rate Lower Bound

2016 ◽  
Vol 2016 (085) ◽  
Author(s):  
Taisuke Nakata ◽  
◽  
Hiroatsu Tanaka ◽  
Keyword(s):  
Interest Rate ◽  
Lower Bound ◽  
Yield Curves ◽  
Equilibrium Yield ◽  
The Interest Rate

The Case for Imposing Cashlessness: A Review Article

2018 ◽  
Vol 56 (4) ◽  
pp. 1587-1591
Author(s):  
Neil Wallace
Keyword(s):  
Fiscal Policy ◽  
Interest Rate ◽  
Lower Bound ◽  
Central Bank ◽  
Review Article ◽  
Zero Lower Bound ◽  
Illegal Activity ◽  
The Interest Rate

In The Curse of Cash, Rogoff (2016) makes two arguments. (i) Large denominations of currency are primarily used for illegal activity. Therefore, eliminating them would have benefits that far outweigh the costs in terms of lost seigniorage. (ii) The zero lower bound (ZLB) on the interest rate implied by the possibility of holding large amounts of currency is a costly constraint on central-bank policy. The best way to eliminate the ZLB is to eliminate all but small denominations of currency, ten dollars and lower, and to have those be in the form of coins. The style of the book, no models and no symbols, works fairly well for (i), but not so well for (ii). For (ii), the author is unclear about a crucial matter: what fiscal policy accompanies alternative interest-rate settings chosen by the central bank? ( JEL E26, E42, E43, E52, E58, E62)

scholarly journals The Empirical Implications of the Interest-Rate Lower Bound

2017 ◽  
Vol 2017 (083r2) ◽  
pp. 1-74
Author(s):  
Christopher J. Gust ◽  
◽  
Edward P. Herbst ◽  
J. David López-Salido ◽  
Matthew E. Smith
Keyword(s):  
Interest Rate ◽  
Lower Bound ◽  
The Interest Rate ◽  
Empirical Implications

Yield Curves, Swap Curves, and Term Structure of Interest Rates

2019 ◽  
pp. 203-228
Author(s):  
Tom P. Davis ◽  
Dmitri Mossessian
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Term Structure ◽  
Yield Curve ◽  
Yield Curves ◽  
No Arbitrage ◽  
Interest Rate Swap ◽  
The Interest Rate ◽  
Rate Swap ◽  
The U.S

This chapter discusses multiple definitions of the yield curve and provides a conceptual understanding on the construction of yield curves for several markets. It reviews several definitions of the yield curve and examines the basic principles of the arbitrage-free pricing as they apply to yield curve construction. The chapter also reviews cases in which the no-arbitrage assumption is dropped from the yield curve, and then moves to specifics of the arbitrage-free curve construction for bond and swap markets. The concepts of equilibrium and market curves are introduced. The details of construction of both types of the curve are illustrated with examples from the U.S. Treasury market and the U.S. interest rate swap market. The chapter concludes by examining the major changes to the swap curve construction process caused by the financial crisis of 2007–2008 that made a profound impact on the interest rate swap markets.

scholarly journals The Empirical Implications of the Zero Lower Bound on the Interest Rate: The Case of the Czech Economy

2016 ◽  
Vol 64 (2) ◽  
pp. 603-616 ◽  
Author(s):  
Miroslav Hloušek
Keyword(s):  
Interest Rate ◽  
Lower Bound ◽  
Zero Lower Bound ◽  
Inflation Volatility ◽  
Percentage Points ◽  
Monetary Policy Rule ◽  
Tradable Sector ◽  
The Interest Rate ◽  
Macroeconomic Implications ◽  
Empirical Implications

This paper uses an estimated DSGE model of the Czech economy to study the macroeconomic implications of various shocks when the interest rate is constrained by the zero lower bound. The goal is to identify which shocks represent threats for the economy and how large the distortions are. The results show that four single shocks can take the economy to the zero lower bound, and that of the four, productivity shock in the tradable sector is the most dangerous. The consequences for the behaviour of macroeconomic variables are nontrivial and, quite naturally, increase with the size of the shock and the frequency of occurrence. If the economy is subject to all model specific shocks, there are distortions in terms of lower average values of output and consumption (by more than one percentage point) and higher inflation volatility (by more than six percentage points). To reduce these costs, the central bank should give higher weight to inflation and lower weight to the output gap in monetary policy rule.

scholarly journals A Model of Monetary Transmission Mechanism

2020 ◽  
Author(s):  
Yuuki Maruyama
Keyword(s):  
Interest Rate ◽  
Lower Bound ◽  
Risk Aversion ◽  
Risk Premium ◽  
Market Price ◽  
Zero Lower Bound ◽  
Government Bonds ◽  
Total Investment ◽  
The Interest Rate ◽  
Interest Rate Channel

The point of this model is that total investment in the economy is not determined by the equilibrium of the interest rate alone, but by the equilibrium of both the interest rate and the market price of risk (risk premium). In this model, the lower the discount rate or risk aversion of people, the higher the total investment. This model shows that when the interest rate is not at the zero lower bound, the total investment is only slightly affected by people's risk aversion, but at the zero lower bound, the total investment is inversely proportional to people's risk aversion. In addition, this model is used to analyze monetary policy. It is shown that the interest rate channel and the credit channel can be analyzed with the same formula and the effect of the interest rate channel is small. This explains why a central bank can greatly increase the total investment with small changes in the interest rate. Additionally, this paper analyzes fiscal policy, helicopter money, and government bonds.

scholarly journals The Empirical Implications of the Interest-Rate Lower Bound

2016 ◽  
Vol 2016 (83r1) ◽  
pp. 1-47 ◽  
Author(s):  
Christopher J. Gust ◽  
◽  
J. David López-Salido ◽  
Matthew E. Smith ◽  
Edward P. Herbst
Keyword(s):  
Interest Rate ◽  
Lower Bound ◽  
The Interest Rate ◽  
Empirical Implications

scholarly journals INFORMATION VALUE OF THE INTEREST RATE AND THE ZERO LOWER BOUND

2019 ◽  
Vol 24 (7) ◽  
pp. 1758-1784
Author(s):  
Sang Seok Lee
Keyword(s):  
Interest Rate ◽  
Lower Bound ◽  
Information Structure ◽  
Information Value ◽  
New Keynesian ◽  
Zero Lower Bound ◽  
Keynesian Model ◽  
State Of The Economy ◽  
The Interest Rate ◽  
The Cost

Why is a zero lower bound episode long-lasting and disruptive? This paper proposes the interruption of information flow from the central bank’s interest rate decision to the private sector as a channel by which the destabilizing effect of the zero lower bound constraint on the nominal interest rate is amplified. This mechanism is incorporated into the new Keynesian model by modifying its information structure. This paper shows that the information loss at the zero lower bound can increase (a) the duration of the zero lower bound episodes and (b) the size of deflation and output gap loss. The result in this paper demonstrates that enhanced information sharing by the central bank about the state of the economy can be effective at alleviating the cost of the zero lower bound.

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