scholarly journals The Effects of Monetary Policy on House Prices in Spain: the role of the economic and monetary union membership in the housing bubble prior to the great recession

2018 ◽  
Vol 2 (2) ◽  
pp. 5
Author(s):  
Tibor Pál
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
House Prices ◽  
Monetary Transmission ◽  
Interest Rate Policy ◽  
Housing Boom ◽  
Rate Policy ◽  
The Impact

Aim: This paper aims to discover the evolution of monetary transmission in Spain by focusing on the short-term interest rate, credit aggregates and house prices through different stages of economic development and European integration between 1975 and 2008. In addition, the analysis devotes special attention to the interval of the last housing boom, in order to reveal the importance of the interest rate policy of the ECB.Design / Research methods: The study applies a tri-variate autoregressive model assigned to three overlapping periods outlined by regime shifts in the Spanish economy. The estimation output determines the strength and persistency of the links between interest rates, credit aggregates and house prices. Consequently, the results of the econometric analysis provide proper base for comparison in order to identify the dominating channels of monetary transmissions through a prolonged period.Conclusions / findings: It is found that the transmission mechanism in Spain essentially altered over time since 1975. At the beginning of the full analysed interval the role of the credit channel was dominant, then its importance gradually diminished. After the EMU accession the traditional interest rate channel became the leading factor with an intensified and more persistent effect on house prices.Originality / value of the article: While there are numerous researches aimed at estimating the impact of monetary policy on the real economy, empirical studies focusing exclusively on the link between interest rate policy and house prices in Spain are still rare. As the present paper concentrates solely on the Spanish characteristics through extended interval, the study provides country-specific inferences.Implications of the research: Understanding the mechanism of the monetary policy effects on the housing sector is an essential aspect of designing policy interventions aimed at keeping house price development in check.Limitations of the research: Despite the significant results of the empirical analysis, the excessively dynamic increase in the property prices suggests that the factor of irrational expectations also played important role in the latest Spanish housing bubble.Key words: Monetary policy, VAR, ECB, Housing boom, Monetary transmission mechanismJEL: E52, E58.

scholarly journals Negative Interest Rate Risk. Atavism or Normalization of Central Banks’ Monetary Policy

2019 ◽  
Vol 3 (342) ◽  
pp. 89-116
Author(s):  
Irena Pyka ◽  
Aleksandra Nocoń
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Central Banks ◽  
Interest Rate Risk ◽  
Interest Rate Policy ◽  
Rate Policy ◽  
Negative Interest Rate Policy

In the face of the global financial crisis, central banks have used unconventional monetary policy instruments. Firstly, they implemented the interest rate policy, lowering base interest rates to a very low (almost zero) level. However, in the following years they did not undertake normalizing activities. The macroeconomic environment required further initiatives. For the first time in history, central banks have adopted Negative Interest Rate Policy (NIRP). The main aim of the study is to explore the risk accompanying the negative interest rate policy, aiming at identifying channels and consequences of its impact on the economy. The study verifies the research hypothesis stating that the risk of negative interest rates, so far unrecognized in Theory of Interest Rate, is a consequence of low effectiveness of monetary policy normalization and may adopt systemic nature, by influencing – through different channels – the financial stability and growth dynamics of the modern world economy.

scholarly journals Monetary Policy Shocks in the Russian Economy and Their Macroeconomic Effects

2019 ◽  
Vol 14 (4) ◽  
pp. 48-75
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Empirical Evidence ◽  
Monetary Policy Shocks ◽  
Interest Rate Policy ◽  
Russian Economy ◽  
Policy Shocks ◽  
Rate Policy ◽  
The Interest Rate

This section conducts an estimate of the impulse response function of key macroeconomic variables to monetary policy shocks in Russia. The estimates are carried out through a dynamic factor model (DFM) of the Russian economy with structural identification of shocks by imposing various sets of sign restrictions on the behavior of endogenous variables. We restricted first the monetary aggregate M2 only (a decrease in response to an increase of the Key rate), and then—simultaneously—M2, real effective exchange rate (an increase), and GDP (a decrease). We estimated the DFM using a large dataset of 58 macroeconomic and financial variables. The estimation results suggest that there is no decreasing response of consumer prices to an exogenous tightening of the interest rate policy of the Central Bank of Russia. This empirical evidence is supported implicitly by DFM-based predictions that under the imposition of such a decreasing response as an identifying restriction to the model, a positive interest rate shock is not transmitted through the interest rate channel of monetary policy to expected increases of the interest rates on commercial loans and private deposits. However, existing empirical evidence refutes this model-based result. Therefore, this study supports the view according to which a tightening of monetary policy in Russia is inefficient in terms of restraining inflation. In addition, monetary policy shocks negatively affect investments, retail sales, export and import, real wages, and employment. Different economic activities react differently to monetary policy shocks: export-oriented activities are not sensitive to these shocks, whereas domestic pro-cyclical activities (e.g. construction) can be substantially depressed in response to unexpected increases of interest rates. Finally, the expectations of economic agents are also significantly affected by shocks in the interest rate policy of the Bank of Russia.

scholarly journals THE EFFECTIVENESS OF THE FUNCTIONING OF THE INTEREST RATE CHANNEL OF MONETARY TRANSMISSION IN UKRAINE

2021 ◽  
Author(s):  
Volodymyr Mishchenko ◽  
Svitlana Naumenkova ◽  
Svitlana Mishchenko
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Operating Conditions ◽  
Monetary Transmission ◽  
Basic Principles ◽  
Interest Rate Policy ◽  
National Bank ◽  
Rate Policy ◽  
The Interest Rate ◽  
Interest Rate Channel

Ensuring a high level of monetary regulation of the economy and improving the efficiency of the central bank's monetary policy largely depend on how effective is the mechanisms of transmission of monetary impulses from the decisions of monetary authorities to market participants through the use of monetary transmission. Given that in the current environment, interest rate policy is the main component of the monetary policy of the vast majority of central banks, interest rate channel is important in the process of monetary transmission. This is also due to the fact that in the monetary transmission system, the interest channel is most closely linked to the mechanisms of functioning of monetary, credit and currency channels. Solving this problem requires the identification the role of the interest channel in the mechanism of monetary transmission, the peculiarities of its function in current conditions, revealing clear causal links and the basic principles of the systematic regularity of monetary development. In addition, it is necessary to identify clear criteria and methods for assessing the effectiveness of the channel, as well as systems and indicators, which allow the use of several parameters in the flow of interest to the channel on the basis of monetary and macroeconomic indicators. The conducted research is based on the statistics of the National Bank of Ukraine for 2005-2020, the system of economic-statistical and economic-mathematical methods, as well as on the calculation of indicators, and is characterize the reliability of models. Quantitative assessment of the efficiency and operating conditions of the interest rate channel of the monetary transmission mechanism should be based on the basic principles of monetary theory and a reliable statistical base. This suggests ways to improve the efficiency of the interest rate channel through the central bank's interest rate policy, adequate money market conditions, and prudent government borrowing policies in the domestic market to ensure efficient transmission of monetary impulses from the central bank to the real sector of the economy. The results of the study can be used to substantiate the forecast parameters of monetary indicators of the monetary policy of the National Bank of Ukraine (NBU) and the conditions of effective functioning of the interest rate channel of monetary transmission in Ukraine in the medium term.

scholarly journals Die Auswirkungen Der Zinspolitik Im Bankensystem Und Bei Immobilienentwicklungen / The Impact Of Interest Rate Policy, On The Banking System And On Real Estate Development

2016 ◽  
Vol 6 (2) ◽  
pp. 13-25
Author(s):  
Pamela Priess
Keyword(s):  
Interest Rate ◽  
Real Estate ◽  
Interest Rates ◽  
Risk Premium ◽  
Real Estate Market ◽  
Liquidity Premium ◽  
Interest Rate Policy ◽  
Rate Policy ◽  
The Interest Rate ◽  
The Impact

Abstract The research purpose is to find out if signs of a real estate bubble are shown at the austrian real estate market right now. Lending rates are composed of different factors: the base rate is the price that the customer is willing to pay. The risk premium is given to compensate the lenders risk of full or partial failure of repayment. The inflation adjustment takes into account the impairment of money over the term of a loan. The liquidity premium increases with extension of the term of the loan. The European Central Bank influences the interest rate policy by varying the interest for money saved there by the banks. At the moment there are used negative interest rates, i.e. penalty interest. The methodology used was that recently the ECB lowered the interest rates which might cause real estate bubbles and, subsequently, banks and economic crises may follow, if interest rates were to be increased again sooner or later. Therefor the author studied the amount of sales and the connection to the interest rates and the interest rate policy of the banks right now. Summarizing it can be seen that in Kittsee, an Austrian area with a lot of real estate sales, as an example, 565 real estate properties were sold in the years 2005 to 2015, the median prices increased in relation to the buyers residence in Austria or non- Austrians at about 375% to 490%, this might indicate signs of change on the market.

scholarly journals Central bank interest policy: conceptual concepts and socio-economic context

2021 ◽  
Vol 7 (Extra-E) ◽  
pp. 531-536
Author(s):  
Aleksandr N. Sukharev ◽  
Sergey N. Smirnov
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Interest Rate Policy ◽  
Economic Context ◽  
Negative Interest Rates ◽  
Interest Policy ◽  
Rate Policy ◽  
The Interest Rate

The article reveals the goals and mechanisms of the interest rate policy of the central bank. The role of the discount rate in ensuring financial and macroeconomic stability is shown. The Taylor rule is presented and justified in a modified form, by including the money supply parameter in it. The phenomenon of negative interest rates is revealed.

scholarly journals An Investigation on the Monetary Policy and Short-term Interest Rates in Japan

2011 ◽  
Vol 1 (1) ◽  
pp. 64 ◽  
Author(s):  
Chikashi TSUJI
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Taylor Rule ◽  
Consumer Price Index ◽  
Call Rate ◽  
Interest Rate Policy ◽  
Zero Interest Rate Policy ◽  
The Us ◽  
Rate Policy

We explore the intertemporal linkage between call rate changes, consumer price index (CPI) changes, and real gross domestic product (GDP) changes in Japan based on the Taylor rule of monetary policy. In our analysis, we consider two sample periods, namely, the former is before zero-interest rate policy and the latter is after it. According to our empirical results, first, we find that the relations between call rate changes and GDP changes and those between call rate changes and CPI changes are weak before zero-interest rate policy. Second, we also find that after zero-interest rate policy, mutual intertemporal relations between call rate changes and GDP changes are seen as the US Taylor rule suggests, although the linkage between call rate changes and CPI changes is not seen. Hence after zero-interest rate policy, regarding call rates and GDP, the relations suggested by US Taylor rule are found in Japan.

scholarly journals INFLUENCE OF THE CENTRAL BANK'S INTEREST POLICY ON CREDIT MARKET

2020 ◽  
Vol 1 (25(52)) ◽  
pp. 26-29
Author(s):  
L. M. Loginova ◽  
E. Y. Loginova
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Credit Market ◽  
Real Sector ◽  
Interest Rate Policy ◽  
Interest Rate Dynamics ◽  
Interest Policy ◽  
Rate Policy ◽  
The Cost

The article considers the role of the Central Bank's interest rate in conducting monetary policy. The influence of interest rate dynamics on the cost of credit resources of the real sector of the Pridnestrovian economy is analyzed. The reasons for the change in the refinancing rate for the period 2006-2019 are analyzed. The main objectives of the Central Bank's interest rate policy are outlined.

scholarly journals The Demand for Financial Assets in Pakistan

1994 ◽  
Vol 33 (2) ◽  
pp. 135-146
Author(s):  
Sajjad Akhtar ◽  
Sajid Manzoor
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Financial Markets ◽  
Interest Rates ◽  
A Priori ◽  
Single Equation ◽  
Financial Assets ◽  
Significant Saving ◽  
Interest Rate Policy ◽  
Rate Policy

In recent years Pakistan has moved to liberalise its financial and capital markets. Consequently the reforms will place heavy demand on the instruments of monetary policy to regulate the working of financial markets. Interest rate policy as a component of monetary policy not only determines the allocation of resources between assets but also within each class of assets. Given the scant research on intra-asset response to intertemporal interest rate movements, the present paper fills the gap by studying the determinants of financial assets and quantifies intra-asset substitutability within a system-wide portfolio framework. Using a simplified version of Brainard and Tobin (1968) model, we explain the asset holdings in terms of wealth and interest rates. We test the model on quarterly holdings of five assets, i.e., saving and fixed deposits, khas deposits, national deposit certificates and defence saving certificates. Asset substitutability is ascertained by single equation OLS, FIML (Iterative 3SLS) and restricted FIML estimation techniques. The system-wide restricted model performs according to a priori expectations. Own interest rate effect is positive and significant in three of the four equations. Five of the six off-diagonals are negative, and three are statistically significant. Saving and fixed deposits exhibit weak complementarity. Khas deposit and national deposit certificates are strong substitutes. The model is also used to decompose the change in portfolio share due to wealth, interest rate and residual components.

Sign in / Sign up

Export Citation Format

Share Document