Price-level Determinancy, Lower Bounds on the Nominal Interest Rate, and Liquidity Traps

2004 ◽  
Author(s):  
Dale W. Henderson ◽  
Ragna Alstadheim
Keyword(s):  
Interest Rate ◽  
Lower Bounds ◽  
Price Level ◽  
Nominal Interest Rate

scholarly journals Monetary policy special features in the context of low interest rates

2020 ◽  
Vol 2 ◽  
pp. 50-64
Author(s):  
Kristina Nesterova ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Price Level ◽  
Nominal Interest Rate ◽  
Inflation Target ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Monetary Rules

Introduction. The paper considers a wide range of monetary policy rules: integral stabilization, NGDP targeting, price level targeting, raising the inflation target, introducing negative nominal interest rates etc. The author also considers discretionary policy used by central banks when the nominal rate is close to zero, such as dramatic preventive cut of the key interest rate and interventions in the open markets with the aim of cutting long-term interest rates. The relevance of this problem is supported by global long-term macroeconomic and demographic factors, such as the dynamics of oil prices and the aging of the population. The aim of the paper is to identify the most effective monetary policy rules in order to reduce the risk of a nominal interest rate falling to zero. Methods. Analysis of the background and the results of general equilibrium models modeling monetary policy is carried out. Analysis of the role of current global trends (based on statistics) in aggravating the problem of declining interest rates. Scientific novelty of the research. The author systematizes the conclusions of modern macroeconomic theory, which offers a number of monetary rules making it possible to reduce the likelihood of falling into the zero bound of interest rate. Results. The effectiveness of monetary rules such as targeting nominal GDP and price levels in preventing the nominal interest rate from falling to zero is shown, primarily due to more efficient public expectations management which is a weak point of discretionary intervention. Conclusions. Under the current global factors for many developed countries and some oil-exporters, the downward trend in nominal rates persists. Combined with slowdown in economic growth, such threat may have negative consequences for the Russian economy. In this case, it seems reasonable to stick to the inflation target above 2% per year and in the future to consider switching to targeting the price level or nominal GDP.

scholarly journals Monetary Policy and Multiple Equilibria

2001 ◽  
Vol 91 (1) ◽  
pp. 167-186 ◽  
Author(s):  
Jess Benhabib ◽  
Stephanie Schmitt-Grohé ◽  
Martín Uribe
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Inflation Rate ◽  
Multiple Equilibria ◽  
Price Level ◽  
Nominal Interest Rate ◽  
Rate Feedback ◽  
Fiscal Regime ◽  
Increasing Function ◽  
The Way

This paper characterizes conditions under which interest-rate feedback rules that set the nominal interest rate as an increasing function of the inflation rate induce aggregate instability by generating multiple equilibria. It shows that these conditions depend not only on the monetary-fiscal regime (as emphasized in the fiscal theory of the price level) but also on the way in which money is assumed to enter preferences and technology. It provides a number of examples in which, contrary to what is commonly believed, active monetary policy gives rise to multiple equilibria and passive monetary policy renders the equilibrium unique. (JEL E52, E31, E63)

PRICE LEVEL DETERMINACY AND NOMINAL INTEREST RATE PEGGING

1988 ◽  
Vol 40 (4) ◽  
pp. 634-645 ◽  
Author(s):  
ARTHUR BENAVIE ◽  
RICHARD T. FROYEN
Keyword(s):  
Interest Rate ◽  
Price Level ◽  
Nominal Interest Rate

Revolving cards: A financial analysis of the credit repayment and legal implications

2021 ◽  
Vol 39 (2) ◽  
Author(s):  
Salvador Cruz Rambaud ◽  
Salvador Cruz Vargas
Keyword(s):  
Interest Rate ◽  
Credit Card ◽  
Financial Analysis ◽  
Point Of View ◽  
Excessive Amount ◽  
Nominal Interest Rate ◽  
Legal Implications ◽  
Long Duration ◽  
Very High

The framework of this paper is credit card holding by users and consumers, more specifically, the so-called revolving cards. In most cases, the true interest rate applied to a credit is much higher than its nominal interest rate. Usually, this is due to the existence of some fees to be paid by the holder, and to the process of splitting the periods of interest. However, the contracted annual interest rate of revolving cards is very high which, together with the peculiar amortization system, gives rise to an excessive amount of interests. The objective of this paper is to describe and analyze, from a legal and financial point of view, the main characteristics of the credit repayment in revolving cards. We conclude that the complete amortization of the principal needs a long duration and the payment of a high amount of interests.

Natural disasters and monetary policy: evidence from an augmented Taylor rule

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nicholas Apergis ◽  
James E. Payne
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Interest Rate ◽  
Natural Disasters ◽  
Natural Disaster ◽  
Taylor Rule ◽  
Nominal Interest Rate ◽  
Policy Response ◽  
Content Type ◽  
Short Run

Purpose The purpose of this paper is to examine the short-run monetary policy response to five different types of natural disasters (geophysical, meteorological, hydrological, climatological and biological) with respect to developed and developing countries, respectively. Design/methodology/approach An augmented Taylor rule monetary policy model is estimated using systems generalized method of moments panel estimation over the period 2000–2018 for a panel of 40 developed and 77 developing countries, respectively. Findings In the case of developed countries, the greatest nominal interest rate response originates from geophysical, meteorological, hydrological and climatological disasters, whereas for developing countries the nominal interest rate response is the greatest for geophysical and meteorological disasters. For both developed and developing countries, the results suggest the monetary authorities will pursue expansionary monetary policies in the short-run to lower nominal interest rates; however, the magnitude of the monetary response varies across the type of natural disaster. Originality/value First, unlike previous studies, which focused on a specific type of natural disaster, this study examines whether the short-run monetary policy response differs across the type of natural disaster. Second, in relation to previous studies, the analysis encompasses a much larger panel data set to include 117 countries differentiated between developed and developing countries.

Sign in / Sign up

Export Citation Format

Share Document