Download or read book Negative Interest Rate Policy NIRP written by Andreas Jobst and published by International Monetary Fund. This book was released on 2016-08-10 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: More than two years ago the European Central Bank (ECB) adopted a negative interest rate policy (NIRP) to achieve its price stability objective. Negative interest rates have so far supported easier financial conditions and contributed to a modest expansion in credit, demonstrating that the zero lower bound is less binding than previously thought. However, interest rate cuts also weigh on bank profitability. Substantial rate cuts may at some point outweigh the benefits from higher asset values and stronger aggregate demand. Further monetary accommodation may need to rely more on credit easing and an expansion of the ECB’s balance sheet rather than substantial additional reductions in the policy rate.
Download or read book Negative Interest Rates written by Luís Brandão Marques and published by International Monetary Fund. This book was released on 2021-03-03 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper focuses on negative interest rate policies and covers a broad range of its effects, with a detailed discussion of findings in the academic literature and of broader country experiences.
Download or read book Enabling Deep Negative Rates to Fight Recessions A Guide written by Ruchir Agarwal and published by International Monetary Fund. This book was released on 2019-04-29 with total page 89 pages. Available in PDF, EPUB and Kindle. Book excerpt: The experience of the Great Recession and its aftermath revealed that a lower bound on interest rates can be a serious obstacle for fighting recessions. However, the zero lower bound is not a law of nature; it is a policy choice. The central message of this paper is that with readily available tools a central bank can enable deep negative rates whenever needed—thus maintaining the power of monetary policy in the future to end recessions within a short time. This paper demonstrates that a subset of these tools can have a big effect in enabling deep negative rates with administratively small actions on the part of the central bank. To that end, we (i) survey approaches to enable deep negative rates discussed in the literature and present new approaches; (ii) establish how a subset of these approaches allows enabling negative rates while remaining at a minimum distance from the current paper currency policy and minimizing the political costs; (iii) discuss why standard transmission mechanisms from interest rates to aggregate demand are likely to remain unchanged in deep negative rate territory; and (iv) present communication tools that central banks can use both now and in the event to facilitate broader political acceptance of negative interest rate policy at the onset of the next serious recession.
Download or read book Negative Monetary Policy Rates and Portfolio Rebalancing Evidence from Credit Register Data written by Margherita Bottero and published by International Monetary Fund. This book was released on 2019-02-28 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study negative interest rate policy (NIRP) exploiting ECB's NIRP introduction and administrative data from Italy, severely hit by the Eurozone crisis. NIRP has expansionary effects on credit supply-- -and hence the real economy---through a portfolio rebalancing channel. NIRP affects banks with higher ex-ante net short-term interbank positions or, more broadly, more liquid balance-sheets, not with higher retail deposits. NIRP-affected banks rebalance their portfolios from liquid assets to credit—especially to riskier and smaller firms—and cut loan rates, inducing sizable real effects. By shifting the entire yield curve downwards, NIRP differs from rate cuts just above the ZLB.
Download or read book Bank Profitability and Risk Taking written by Natalya Martynova and published by International Monetary Fund. This book was released on 2015-11-25 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Traditional theory suggests that more profitable banks should have lower risk-taking incentives. Then why did many profitable banks choose to invest in untested financial instruments before the crisis, realizing significant losses? We attempt to reconcile theory and evidence. In our setup, banks are endowed with a fixed core business. They take risk by levering up to engage in risky ‘side activities’(such as market-based investments) alongside the core business. A more profitable core business allows a bank to borrow more and take side risks on a larger scale, offsetting lower incentives to take risk of given size. Consequently, more profitable banks may have higher risk-taking incentives. The framework is consistent with cross-sectional patterns of bank risk-taking in the run up to the recent financial crisis.
Download or read book Pushed Past the Limit How Japanese Banks Reacted to Negative Interest Rates written by Mr.Gee Hee Hong and published by International Monetary Fund. This book was released on 2018-06-13 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we investigate how negative interest rate policy (NIRP) introduced in January 2016 by the Bank of Japan (BoJ) affected Japanese banks' lending and risk taking behavior. The BoJ's announcement was an unexpected surprise to the market and was followed by a sharp drop in equity prices of Japanese financial firms. We exploit the cross-sectional variation in the change of share prices on the day of the announcement to measure banks' differential exposure to NIRP. We show that more exposed banks increased their credit and took on more risk compared to banks that were less exposed to negative rates.
Download or read book Designing Central Bank Digital Currencies written by Mr.Itai Agur and published by International Monetary Fund. This book was released on 2019-11-18 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the optimal design of a central bank digital currency (CBDC) in an environment where agents sort into cash, CBDC and bank deposits according to their preferences over anonymity and security; and where network effects make the convenience of payment instruments dependent on the number of their users. CBDC can be designed with attributes similar to cash or deposits, and can be interest-bearing: a CBDC that closely competes with deposits depresses bank credit and output, while a cash-like CBDC may lead to the disappearance of cash. Then, the optimal CBDC design trades off bank intermediation against the social value of maintaining diverse payment instruments. When network effects matter, an interest-bearing CBDC alleviates the central bank's tradeoff.
Download or read book The Incredible Upside Down Fixed Income Market Negative Interest Rates and Their Implications written by Vineer Bhansali and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Bank Performance written by Jacob Bikker and published by Routledge. This book was released on 2008-10-27 with total page 173 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic literature pays a great deal of attention to the performance of banks, expressed in terms of competition, concentration, efficiency, productivity and profitability. This book provides an all-embracing framework for the various existing theories in this area and illustrates these theories with practical applications. Evaluating a broad field of research, the book describes a profit maximizing bank and demonstrates how several widely-used models can be fitted into this framework. The authors also present an overview of the current major trends in banking and relate them to the assumptions of each model, thereby shedding light on the relevance, timeliness and shelf life of the various models. The results include a set of recommendations for a future research agenda. Offering a comprehensive analysis of bank performance, this book is useful for all of those undertaking research, or are interested, in areas such as banking, competition, supervision, monetary policy and financial stability.
Download or read book Introduction to Central Banking written by Ulrich Bindseil and published by Springer Nature. This book was released on 2021-05-18 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt: This open access book gives a concise introduction to the practical implementation of monetary policy by modern central banks. It describes the conventional instruments used in advanced economies and the unconventional instruments that have been widely adopted since the financial crisis of 2007–2008. Illuminating the role of central banks in ensuring financial stability and as last resort lenders, it also offers an overview of the international monetary framework. A flow-of-funds framework is used throughout to capture this essential dimension in a consistent and unifying manner, providing a unique and accessible resource on central banking and monetary policy, and its integration with financial stability. Addressed to professionals as well as bachelors and masters students of economics, this book is suitable for a course on economic policy. Useful prerequisites include at least a general idea of the economic institutions of an economy, and knowledge of macroeconomics and monetary economics, but readers need not be familiar with any specific macroeconomic models.
Download or read book Finance Development June 2020 written by International Monetary Fund and published by International Monetary Fund. This book was released on 2020-06-01 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Finance & Development, June 2020
Download or read book The natural economic Order written by Silvio Gesell and published by Lulu.com. This book was released on 2009 with total page 452 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Breaking Through the Zero Lower Bound written by Ruchir Agarwal and published by International Monetary Fund. This book was released on 2015-10-23 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: There has been much discussion about eliminating the “zero lower bound” by eliminating paper currency. But such a radical and difficult approach as eliminating paper currency is not necessary. Much as during the Great Depression—when countries were able to revive their economies by going off the gold standard—all that is needed to empower monetary policy to cut interest rates as much as needed for economic stimulus now is to change from a paper standard to an electronic money standard, and to be willing to have paper currency go away from par. This paper develops the idea further and shows how such a mechanism can be implemented in a minimalist way by using a time-varying paper currency deposit fee between private banks and the central bank. This allows the central bank to create a crawling-peg exchange rate between paper currency and electronic money; the paper currency interest rate can be either lowered below zero or raised above zero. Such an ability to vary the paper currency interest rate along with other key interest rates, makes it possible to stimulate investment and net exports as much as needed to revive the economy, even when inflation, interest rates, and economic activity are quite low, as they are currently in many countries. The paper also examines different options available to the central bank to return to par when negative interest rates are no longer needed, and the associated implications for the financial sector and debt contracts. Finally, the paper discusses various legal, political, and economic challenges of putting in place such a framework and how policymakers could address them.
Download or read book The Liquidation of Government Debt written by Ms.Carmen Reinhart and published by International Monetary Fund. This book was released on 2015-01-21 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: High public debt often produces the drama of default and restructuring. But debt is also reduced through financial repression, a tax on bondholders and savers via negative or belowmarket real interest rates. After WWII, capital controls and regulatory restrictions created a captive audience for government debt, limiting tax-base erosion. Financial repression is most successful in liquidating debt when accompanied by inflation. For the advanced economies, real interest rates were negative 1⁄2 of the time during 1945–1980. Average annual interest expense savings for a 12—country sample range from about 1 to 5 percent of GDP for the full 1945–1980 period. We suggest that, once again, financial repression may be part of the toolkit deployed to cope with the most recent surge in public debt in advanced economies.
Download or read book Bank Leverage and Monetary Policy s Risk Taking Channel written by Mr.Giovanni Dell'Ariccia and published by International Monetary Fund. This book was released on 2013-06-06 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on the internal ratings of U.S. banks on loans to businesses over the period 1997 to 2011 from the Federal Reserve’s survey of terms of business lending. We find that ex-ante risk taking by banks (as measured by the risk rating of the bank’s loan portfolio) is negatively associated with increases in short-term policy interest rates. This relationship is less pronounced for banks with relatively low capital or during periods when banks’ capital erodes, such as episodes of financial and economic distress. These results contribute to the ongoing debate on the role of monetary policy in financial stability and suggest that monetary policy has a bearing on the riskiness of banks and financial stability more generally.
Download or read book Pragmatic Capitalism written by Cullen Roche and published by Macmillan. This book was released on 2014-07-08 with total page 252 pages. Available in PDF, EPUB and Kindle. Book excerpt: An insightful and original look at why understanding macroeconomics is essential for all investors
Download or read book The New Monetary Policy written by Philip Arestis and published by Edward Elgar Publishing. This book was released on 2006-01-01 with total page 261 pages. Available in PDF, EPUB and Kindle. Book excerpt: . . . this book provides a useful overview of the challenges facing the IT policy framework, both by pointing to the limitations of the underlying theory and, more importantly, by outlining the importance of a transparent policy framework for anchoring expectations. . . the book should be of interest to all central bankers and students of monetary policy. Colin Rogers, Economic Record Recent developments in macroeconomic and monetary thinking have given a new impetus to the management of the economy. The use of monetary policy by way of manipulating the rate of interest to affect inflation is now well accepted by both academic economists and central bank practitioners. Beginning with an assessment of new thinking in macroeconomics and monetary theory, this book suggests that many countries have adopted the New Consensus Monetary Policy since the early 1990s in an attempt to reduce inflation to low levels. It goes on to illustrate that the explicit control of the money supply, which was fashionable in the 1970s and 1980s in the UK, US, Europe and elsewhere, was abandoned in favour of monetary rules that focus on interest rate manipulation by the central bank. The objective of these rules is to achieve specific, or a range of, inflation targets. Bringing together a distinguished cast of international contributors, this book presents a collection of papers, which discuss the following issues amongst others: the stability of the macroeconomic equilibrium monetary policy divergences in the Euro area stock market prices the US post- new economy bubble the information economy inflation targeting. This useful analysis of New Consensus Monetary Policy will be of great interest to financial economists and international monetary economists, as well as students and scholars of macroeconomics and finance.
