Optimal Consumption over Time when Prices and Interest Rates Follow a Markovian Process

Econometrica ◽  
1975 ◽  
Vol 43 (2) ◽  
pp. 261 ◽  
Author(s):  
A. Anastasopoulos ◽  
Stratis Kounias
Keyword(s):  
Interest Rates ◽  
Markovian Process ◽  
Optimal Consumption ◽  
Over Time

scholarly journals Macroeconomic Synchronization Between G3 Countries

2002 ◽  
Vol 3 (2) ◽  
pp. 137-153 ◽  
Author(s):  
Amado Peirό
Keyword(s):  
Business Cycle ◽  
Interest Rates ◽  
Short Term ◽  
The Us ◽  
Production Prices ◽  
Over Time

AbstractThis paper studies the existence of a world business cycle by examining quarterly and annual comovements in production, prices and interest rates in the three main world economies: Germany, Japan and the US. In accordance with earlier studies, contemporaneous relationships clearly dominate short-term dynamics. The evidence indicates the existence of strong comovements in prices and long-term interest rates, and, to a lesser degree, in GDP and short-term interest rates. They are, however, rather unstable over time.

scholarly journals Monetary Policy Surprises over Time

2018 ◽  
Vol 08 (01) ◽  
pp. 1840002 ◽  
Author(s):  
Marcello Pericoli ◽  
Giovanni Veronese
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Interest Rates ◽  
Euro Area ◽  
Yield Curve ◽  
Sovereign Spreads ◽  
Definition Of ◽  
Term Premia ◽  
The Impact ◽  
Over Time

We document how the impact of monetary surprises on euro-area and US financial markets has changed from 1999 to date. We use a definition of monetary policy surprises, which singles out movements in the long-end of the yield curve — rather than those changing nearby futures on the central bank reference rates. By focusing only on this component of monetary policy, our results are more comparable over time. We find a hump-shaped response of the yield curve to monetary policy surprises, both in the pre-crisis period and since 2013. During the crisis years, Fed path-surprises, largely through their effect on term premia, account for the impact on interest rates, which is found to be increasing in tenor. In the euro area, the path-surprises reflect the shifts in sovereign spreads, and have a large impact on the entire constellation of interest rates, exchange rates and equity markets.

scholarly journals A new approach for satisfactory pensions with no guarantees

2019 ◽  
Vol 10 (1) ◽  
pp. 3-21
Author(s):  
M. Carmen Boado-Penas ◽  
Julia Eisenberg ◽  
Axel Helmert ◽  
Paul Krühner
Keyword(s):  
Risk Management ◽  
Interest Rates ◽  
Asset Management ◽  
Expected Return ◽  
New Approach ◽  
Low Interest Rates ◽  
Key Variables ◽  
Pension Benefits ◽  
Pension Payments ◽  
Over Time

AbstractThe increase in longevity, the ultra-low interest rates and the guarantees associated to pension benefits have put significant strain on the pension industry. Consequently, insurers need to be in a financially sound position while offering satisfactory benefits to participants. In this paper, we propose a pension design that goes beyond the idea of annuity pools and unit-linked insurance products. The purpose is to replace traditional guarantees with low volatility, mainly achieved by collective smoothing algorithms and an adequate asset management. With the aim of offering security to the insured, we discuss the optimisation of some key variables of the proposed pension product to target both a satisfactory level of the initial pension and stable pension payments over time. By combining such well-known products as unit-linked and annuities, we show that it is possible to design a pension product with both high-expected return and low risk for the policyholder. However, differently than in the classical unit-linked framework, we do not allow the individuals to choose the underlying funds. Instead, the funds are under the surveillance of an insurance company’s professional risk management, which induces better informed decisions.

Calculating penalties for reforestation failures: an Alberta case study

2005 ◽  
Vol 35 (3) ◽  
pp. 557-566
Author(s):  
Marilea Pattison Perry ◽  
James A Beck ◽  
Martin K Luckert ◽  
William A White
Keyword(s):  
Interest Rates ◽  
Probability Of Detection ◽  
Discount Rates ◽  
Public And Private ◽  
Optimal Amount ◽  
Social Rate ◽  
The Social ◽  
Monitoring Costs ◽  
Over Time

Provincial governments across Canada rely on regeneration requirements and penalties to promote reforestation following harvesting. However, little has been written on how to determine optimal levels of penalties for noncompliance such that tenure holders have incentives to further social reforestation objectives. This paper shows how reforestation penalties may be calculated in the case of Alberta. The calculation of the penalty is shown to be dependent on (i) changes in the values of future annual allowable cuts caused by failure to promptly regenerate, (ii) the portion of stumpage values collected with stumpage fees, (iii) nontimber values influenced by reforestation, (iv) differences in private and social discount rates, (v) costs of detecting noncompliance, and (vi) the probability of detecting infractions. In the case of Alberta, (v) and (vi) are minor considerations, as detection costs are low and probability of detection is high. However, values of (i) through (iv) have large potential impacts on the optimal penalties. For example, if (i) annual allowable cuts drop by 99 m3 for a 3-year reforestation delay (vs. an acceptable 2-year delay) on a 783-ha forest, (ii) stumpage fees are $10 below stumpage value, (iii) nontimber values are zero, and (iv) the private discount is 9%, while the social rate is 6%, then the optimal penalty is $49.17CAN·ha–1. However, if we change (ii) and (iv) such that stumpage fees are $30CAN below stumpage value and the private discount is 9%, while the social rate is 3%, then the optimal penalty is $168.58CAN·ha–1. With zero nontimber values, zero monitoring costs, no divergence between public and private interest rates at 9%, and a probability of detection of 1.00, the current penalty of $30CAN·ha–1·year–1 would approximate the optimal amount if stumpage fees were $20CAN·m–3. The variability in values of (i) through (iv) across forests and over time suggests that problems will arise in establishing a constant penalty for all provincial forests and that penalties should be revised as values change over time.

scholarly journals DEMAND FACTORS FOR BANKING LOANS IN UKRAINE: MODELING AND ASSESSMENT

2021 ◽  
Vol 1 (36) ◽  
pp. 46-56
Author(s):  
S. Hlushchenko ◽  
V. Shportyuk
Keyword(s):  
Interest Rates ◽  
Price Index ◽  
Statistical Data ◽  
Consumer Price Index ◽  
State Regulation ◽  
Var Model ◽  
Practical Application ◽  
Factors Influencing ◽  
Business Entities ◽  
Over Time

The article presents the results of modeling and assessment of the effects of demand factors for banking loans by business entities and households on the volume of bank loaning in Ukraine. The article summarizes the factors influencing on volume of banking loans according to the demand side of business entities and households; performed modeling based on statistical data for Ukrainian practice in the period from 2006 to 2020. The authors developed a VAR-model for estimating the factors influencing the banking loans demand by business entities. According to the constructed model, it is concluded that the change in demand for credit resources by business entities is due to changes in interest rates (by 30%), changes in industrial production index (15.6%), changes in PFTS index 10.7%), change in the price index of industrial producers (1.0%), change in themselves over time (42.5%). The authors also developed a VAR-model for estimating the factors influencing the banking loans demand from households. According to the constructed model, it is concluded that the change in demand for credit resources by households is due to changes in average wages (16.2%), changes in interest rates (16%), changes in expenditures (8.2%), changes in GDP (7.7%), the consumer price index (6.9%), the change in the number of registered unemployed (2.9%) and the change in themselves over time (42.1%). The obtained results can have practical application both within the formation of banking loan policy and within state regulation measures to influence the activation of the credit sector in the country.

scholarly journals Financialization and income generation in the 21st century: rise of the petit rentier class?

2020 ◽  
Author(s):  
Adam Goldstein ◽  
Ziyao Tian
Keyword(s):  
Interest Rates ◽  
Household Income ◽  
Study Data ◽  
Income Generation ◽  
Random Effects Models ◽  
Welfare Institutions ◽  
Correlated Random Effects ◽  
Country Differences ◽  
Government Transfers ◽  
Over Time

Abstract This article considers the consequences of asset-based accumulation for household income factors and social class structure in 29 countries from 1998 to 2016. Are financialization, asset-based welfare institutions, and rising real estate returns fueling a growing class of petit rentiers in capitalist economies? That is, households who accrue more than a trivial share of income from capital rather than labor or government transfers. The analysis draws on the Luxembourg Income Study data. Contrary to expectations, most countries saw declines in the share of households who accrue more than 10%, or 20% of income from assets. Estimates from correlated random effects models indicate that financialization is associated with between-country differences in the size of the petit rentier, but not within-country change over time. The decline of the petit rentier can be partly explained by declining interest rates, which reduces income from bank savings.

The Impact of Foreign Capital Inflow on Savings and Investment: The Case of Pakistan

1987 ◽  
Vol 26 (4) ◽  
pp. 787-789 ◽  
Author(s):  
Naheed Aslam
Keyword(s):  
Interest Rates ◽  
Foreign Capital ◽  
Capital Inflow ◽  
Capital Inflows ◽  
Foreign Assistance ◽  
Domestic Capital ◽  
Foreign Loans ◽  
Foreign Capital Inflows ◽  
The Impact ◽  
Over Time

The paper examines the role of foreign capital in the context of savings and investment for Pakistan for the period of 1963-64 - 1984-85. The question of the impact of foreign capital inflows on domestic resources has assumed primary importance in view of the increasing debt burden and declining concessionality of foreign loans. The data analysis! , based on the classification of loans according to rates of interest and terms to maturity, reveals that the terms and conditions of foreign loans have become more stringent over time, i.e. higher interest rates and lower maturity periods. The worsening terms and conditions of external loans have resulted in increasing reverse flow obligations. Debt servicing as a ratio of export earnings and foreign capital inflow has rapidly increased over time. During 1960-61 - 1970-71, debt-servicing obligations could be met from 14.85 percent of foreign assistance or 10.29 percent of our commodity export earnings, whereas during 1980-81 - 1984-85 foreign debt servicing could be financed from 29.63 percent of export earnings or 64.79 percent of foreign assistance. The heavy debt-servicing burden and unfavorable outlook for external finance has made it absolutely essential that foreign capital funds should generate internally the capacity to repay these loans. This could be facilitated if foreign capital inflows augment domestic capital formation efforts.

Regulated Sharing Economy in the New Normal

2021 ◽  
pp. 1-19
Author(s):  
Volkan Kaymaz
Keyword(s):  
Interest Rates ◽  
Sharing Economy ◽  
2008 Financial Crisis ◽  
Main Motivation ◽  
Access To Credit ◽  
Consumption Expenditures ◽  
Low Interest Rates ◽  
The 2008 Financial Crisis ◽  
Traditional Economy ◽  
Over Time

The sharing economy developed rapidly with the increase in consumption expenditures in a period when low interest rates and access to credit were easy before the 2008 Financial Crisis and entered into serious competition with companies operating in the traditional economy. The use of sharing economy tools has increased as a result of sustainability, environmentalism, desire for new experiences, local tourism, and authentic searches. The sharing economy, whose main motivation is to reintroduce idle products to the market, has changed its priorities over time and turned into a profit-oriented structure, and large companies increased their revenues by increasing the number of users. The criticisms emerging as a result of employment losses, reservation cancellations, reimbursement requests, lack of social security of employees, and therefore not being able to benefit from COVID-19 aids have revealed the missing parts of the sharing economy.

What Factors Determine Changes in House Prices and Rents?

2020 ◽  
pp. 39-56
Author(s):  
Geoffrey Meen ◽  
Christine Whitehead
Keyword(s):  
Interest Rates ◽  
House Prices ◽  
House Price ◽  
Empirical Work ◽  
International Standards ◽  
Macroeconomic Conditions ◽  
Price Trends ◽  
The Uk ◽  
Different Parts ◽  
Over Time

Whatever measure of affordability is used house prices and rents play a central role and Chapter 3 is concerned with what causes these two variables to change over time and vary across different parts of the country. Although increases in house prices have been particularly strong in the UK by international standards, other countries are also discussed. In fact, house price trends and volatility can be explained by a fairly small number of variables – and their influence has been remarkably consistent over the last fifty years. The problem has been rather that house prices are very sensitive to changes in incomes, interest rates and credit conditions and these vary greatly over time. Therefore, modest changes in macroeconomic conditions have disproportionate effects on housing. UK empirical work on market rents is less well-developed than for house prices, but the chapter considers the reasons why rents appear to have risen at a slower rate than house prices.

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