Uncertainty shocks, monetary policy and long-term interest rates

Abstract The aim of the paper is to evaluate the effects of loose monetary policy on corporate investment of manufacturing firms in the Czech Republic during the period between 2006 and 2015. The main focus of the paper is on the effect of low interest rates on investment activity of Czech firms; additionally, the effects of interactions between interest rate and other firm-specific variables are investigated. The results indicate that corporate investment is positively associated with firm size, investment opportunities, and long term debt. Also, a negative effect of the cash position is found. Further, the findings show that monetary policy is a significant determinant of firm investment activity: when the monetary policy is loose, investment is positively affected. Furthermore, differences in the determinants of investment between highly and low leveraged firms were revealed.

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The Unpleasant Arithmetic of the Taylor Rule

Journal of Business Theory and Practice ◽

10.22158/jbtp.v8n3p89 ◽

2020 ◽

Vol 8 (3) ◽

pp. p89

Author(s):

Alejandro Rodriguez-Arana

Keyword(s):

Monetary Policy ◽

Fiscal Policy ◽

Interest Rate ◽

Interest Rates ◽

Phillips Curve ◽

Taylor Rule ◽

Independent Component ◽

Elasticity Of Substitution ◽

Interest Rate Rule

This paper analyzes the effect of a monetary policy that raises the reference interest rate in order to reduce inflation in a situation where the fiscal policy parameters remain constant. In an overlapping generation’s model and in the presence of an accelerationist Phillips curve and a Taylor rule of interest rates, it is observed that increasing the independent component of said rule leads to a solution that at least in a large number of cases is unstable. In the case where the elasticity of substitution is greater than one, inflation falls temporarily, but then it can increase in an unstable manner. One way to achieve stability is to establish an interest rate rule where Taylor’s principle is not met. However, in this case many times the increase in the independent component of this rule will generate greater long-term inflation.

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Basic Monetary Policy Objectives

The Federal Reserve ◽

10.1093/wentk/9780199934485.003.0003 ◽

2013 ◽

Author(s):

Stephen H. Axilrod

Keyword(s):

Monetary Policy ◽

Interest Rates ◽

Federal Reserve ◽

Policy Objectives ◽

Important Objective

What are the Fed’s basic objectives? As noted in the preceding chapter, the goals set for monetary policy in the Federal Reserve Act are maximum employment, stable prices, and low, long-term interest rates. The Fed’s other very important objective, the maintenance of systemic stability...

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The Spillover Effects of the US Unconventional Monetary Policy: New Evidence from Asian Developing Countries

Journal of Risk and Financial Management ◽

10.3390/jrfm13080165 ◽

2020 ◽

Vol 13 (8) ◽

pp. 165

Author(s):

Thi Tran ◽

Hoang Pham

Keyword(s):

Developing Countries ◽

Monetary Policy ◽

Interest Rates ◽

Spillover Effects ◽

Unconventional Monetary Policy ◽

Equity Prices ◽

Developing Markets ◽

The Us ◽

Asian Developing Countries

This paper aims to trace the monthly responses of equity prices, long-term interest rates, and exchange rates in Asian developing markets to the US unconventional monetary policy (UMP). The main research question is to explore whether UMP shocks exist in those markets. We also consider the differences in the mean responses of those asset prices between traditional and non-traditional monetary policy phases. To address such concerns, we employ a panel vector autoregression with exogenous variables (Panel VARX) model and estimate the model by the least-squares dummy variable (LSDV) estimator in three different periods spanning from 2004M2 to 2018M4. The first finding is that UMP shocks from the US are associated with a surge in equity prices, a decline in long-term interest rates, and an appreciation of currencies in Asian developing markets. In contrast, the conventional monetary policy shocks from the US seem to exert adverse effects on these recipient countries. These empirical results suggest that the policymakers in Asian developing countries should cautiously take into account the spillover effects from the US unconventional monetary policy once it is executed.

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