scholarly journals The Stability of Short-Term Interest Rates Pass-Through in the Euro Area During the Financial Market and Sovereign Debt Crises

2015 ◽  
Author(s):  
Sanvi Avouyi-Dovi ◽  
Guillaume Horny ◽  
Patrick Sevestre
Keyword(s):  
Interest Rates ◽  
Financial Market ◽  
Euro Area ◽  
Sovereign Debt ◽  
Short Term ◽  
Debt Crises ◽  
Pass Through ◽  
The Stability

scholarly journals Mutualizing Euro Area debt without a Fiscal Union

2018 ◽  
Vol 36 (2) ◽  
Author(s):  
Stefan Krause Montalbert
Keyword(s):  
Interest Rates ◽  
Euro Area ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
Limited Liability ◽  
Sovereign Debt Crisis ◽  
Short Term ◽  
Fiscal Transfers ◽  
Twin Crisis ◽  
Recent Financial Crisis

Several years have passed since the onset of the most recent financial crisis, and Europe is still not “off the hook.”  A twin crisis emerged: the sovereign debt crisis.  The main objective of this paper is to design a mechanism for pooling Euro Area debt together, in order to lower short-term interest rates, and limit the risk of contagion.  This design, which draws from existing proposals for jointly issued bonds in the Euro Area, contains features that would make it acceptable for participants (such as no ex-ante fiscal transfers across countries, and widespread benefits from lower debt-service payments), while placing a reasonable cap on potential losses from default by other participants through limited liability.

US rates may rise but economic risks are rising faster

2017 ◽  
Keyword(s):  
Interest Rates ◽  
Euro Area ◽  
Sovereign Debt ◽  
Emerging Market ◽  
Content Type ◽  
Political Risks ◽  
Bond Yield ◽  
Treasury Bond ◽  
The Face ◽  
Equity Index

Subject Global equity market trends. Significance The four main US stock market indices began March at record highs, including the benchmark S&P 500 index at 2,400. Driven by expectations of stimulative and pro-business policies under the new US administration, equity markets are flying in the face of signals from the Federal Reserve (Fed) that interest rates will rise three times this year. The probability of a hike at the Fed’s March 14-15 meeting has risen above 80% on growing price pressures and stronger economic data, buoyed by hawkish comments from several Fed governors, including those who were previously dovish. Impacts Despite the post-election US bond market sell-off, around one-third of the stock of euro-area sovereign debt remains negative yielding. The gap between the two-year US Treasury bond yield and its German equivalent has widened to a record, a sign of rising monetary divergence. The euro lost 2% against the dollar in February as political risks escalated in the euro-area, centred around the French election. The emerging market MSCI equity index is 8.6% up this year, after losing 4.5% from November 9 to end-2016, a sign of higher confidence.

scholarly journals The Sustainable Debts of Philip II: A Reconstruction of Castile's Fiscal Position, 1566–1596

2010 ◽  
Vol 70 (4) ◽  
pp. 813-842 ◽  
Author(s):  
Mauricio Drelichman ◽  
Hans-Joachim Voth
Keyword(s):  
Sixteenth Century ◽  
Early Modern ◽  
Sovereign Debt ◽  
Archival Data ◽  
Short Term ◽  
Philip Ii ◽  
Debt Crises ◽  
Liquidity Crises

The defaults of Philip II have attained mythical status as the origin of sovereign debt crises. We reassess the fiscal position of Habsburg Castile, deriving comprehensive estimates of revenue, debt, and expenditure from new archival data. The king's debts were sustainable. Primary surpluses were large and rising. Debt-to-revenue ratios remained broadly unchanged during Philip's reign. Castilian finances in the sixteenth century compare favorably with those of other early modern fiscal states at the height of their imperial ambitions, including Britain. The defaults of Philip II therefore reflected short-term liquidity crises, and were not a sign of unsustainable debts.

scholarly journals Importance Of Money And Credit

2011 ◽  
Vol 8 (1) ◽  
Author(s):  
Michael Cosgrove ◽  
Daniel Marsh
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Federal Reserve ◽  
Rapid Growth ◽  
Credit Crisis ◽  
Short Term ◽  
Demand For Money ◽  
The Stability

The thesis of this paper is that the Federal Reserve could better achieve their goals if they paid more attention to quantity targets of both money and credit. The rapid growth in credit that ended in the credit crisis of 2007 and 2008 might have been avoided had the Federal Reserve attempted to incorporate quantitative credit measures in assessing policy. But their focus on short-term interest rates in conducting monetary policy to the exclusion of credit measures led to inaction on their part. The stability of the demand for money and credit determined by this analysis suggests the Federal Reserve could have taken policy steps early in this cycle jawboning, quantitative and regulatory to temper the credit bubble and potentially avoid the credit crisis.

Searching for new fiscal rules in the euro area: a new proposal

2021 ◽  
Vol 18 (2) ◽  
pp. 145-159
Author(s):  
Jan Priewe
Keyword(s):  
Interest Rates ◽  
Euro Area ◽  
Public Debt ◽  
Fiscal Rules ◽  
The European Union ◽  
Growth Pact ◽  
Fiscal Compact ◽  
The Face ◽  
The Stability ◽  
Interest Payments

While the European Union (EU) fiscal rules are suspended in the years 2020–2022, new rules are in the making and might be activated in 2023. If the old rules were used again, massive austerity would be required in the face of the strongly elevated level of public debt and the gap to the 60 per cent debt cap in the EU Treaty. A new proposal is suggested in this article which requires only small changes in the Treaty and/or the Fiscal Compact, but a strong overhaul in secondary law, that is, the Stability and Growth Pact. The key ideas are to use net interest payments, as a share of GDP, as the new metric for defining debt sustainability rather than gross public debt. This would allow the adjustment of the rules to changing monetary environments, especially interest-rate levels, and changing differentials between interest rates and growth rates. This way, much more fiscal space would be generated both for higher-debt and lower-debt member states and the entire euro area.

Interest Rate Pass-Through: Empirical Results for the Euro Area

2005 ◽  
Vol 6 (1) ◽  
pp. 37-78 ◽  
Author(s):  
Gabe J. de Bondt
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Euro Area ◽  
Vector Autoregressive ◽  
Empirical Results ◽  
Marginal Costs ◽  
Lending Rates ◽  
The Difference ◽  
Pass Through ◽  
The Interest Rate

Abstract This paper empirically examines the interest rate pass-through at the euro area level. The focus is on the pass-through of official interest rates, approximated by the overnight interest rate, to longer-term market interest rates, which, in turn, are a proxy for the marginal costs for banks to attract deposits or grant loans, and therefore passed through to retail bank interest rates. Empirical results, on the basis of a (vector) error-correction and vector autoregressive model, suggest that the pass-through of official interest to market interest rates is complete for money market interest rates up to three months, but not for market interest rates with longer maturities. Furthermore, the immediate pass-through of changes in market interest rates to bank deposit and lending rates is found to be at most 50%, whereas the final pass-through is typically found to be close to 100%, in particular for lending rates. Empirical results for a sub-sample starting in January 1999 show qualitatively similar findings and are supportive of a quicker interest rate pass-through since the introduction of the euro. It is shown that the difference between the adjustment speed of bank deposit and lending rates (typically around one versus three months since the common monetary policy) can to a large extent significantly be explained by credit risk considerations.

scholarly journals Interest rate pass-through estimates from error correction models ECM

2015 ◽  
Vol 5 (1) ◽  
Author(s):  
Le Phan Thi Dieu Thao ◽  
Nguyen Thi Thu Trang
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Commercial Banks ◽  
Money Market ◽  
Viet Nam ◽  
Short Term ◽  
Adjustment Speed ◽  
Lending Rates ◽  
Pass Through

This paper examines the degree of pass-through and adjustment speed of retail interest rates in response to changes in monetary policy rates in commercial banks of Viet Nam during the period 07/2004 to 06/2014. The results show that the degree of pass-through of retail interest rates is incomplete but high (0.7-0.93). The adjustment speed of money market rates & retail interest rates is relatively slow. It takes from 3 to 6 months for money market rates & retail interest rates to be adjusted to long-term equilibrium, except 1 month VNIBOR. 1 month VNIBOR is sensitive to changes of discount rate & refinancing rate in short-term, contrary to 3 month VNIBOR . The degree of pass-through from market rates to retail interest rates is fairly high in the long-term but low in the short-term. The degree of pass-through is different between various retail interest rates. Specifically, the degree of pass-through of deposit rates is higher than that of lending rates both in the short-term & long-term.

Sign in / Sign up

Export Citation Format

Share Document