The Stability of Interest Rate Processes
| Author | : Robert R. Bliss |
| Publisher | : |
| Total Pages | : 36 |
| Release | : 1997 |
| Genre | : Interest rates |
| ISBN | : |
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International Convergence of Capital Measurement and Capital Standards
| Author | : |
| Publisher | : Lulu.com |
| Total Pages | : 294 |
| Release | : 2004 |
| Genre | : Bank capital |
| ISBN | : 9291316695 |
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Modeling the U.S. Short-Term Interest Rate by Mixture Autoregressive Processes
| Author | : Markku Lanne |
| Publisher | : |
| Total Pages | : |
| Release | : 2010 |
| Genre | : |
| ISBN | : |
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A new kind of mixture autoregressive model with GARCH errors is introduced and applied to the U.S. short-term interest rate. According to the diagnostic tests developed in the article and further informal checks, the model is capable of capturing both of the typical characteristics of the short-term interest rate: volatility persistence and the dependence of volatility on the level of the interest rate. The model also allows for regime switches whose presence has been a third central result emerging from the recent empirical literature on the U.S. short-term interest rate. Realizations generated from the estimated model seem stable and their properties resemble those of the observed series closely. The drift and diffusion functions implied by the new model are in accordance with the results in much of the literature on continuous-time diffusion models for the short-term interest rate, and the term structure implications agree with historically observed patterns.
The Term Structure of Interest Rates
| Author | : John Driffill |
| Publisher | : |
| Total Pages | : 44 |
| Release | : 1990 |
| Genre | : Commerce |
| ISBN | : |
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This paper examines data on interest rates in the United Kingdom information on changes in policy regime and their credibility in order to discover the period from 1959-87 using quarterly data. A stochastic regime switching model used by Hamilton, based on an AR(4) model for short rates, and the corresponding model for long rates, does not adequately represent the UK data. Yields on long-term UK government debt behave consistently with the expectations model of the term structure, on a number of basic tests. Their relationship with yields on treasury bills, however, is not consistent with the theory unless an autoregressive risk premium is introduced into the holding period yield on long bonds. The only evidence of a change in the time-series behaviour of long bond yields in these data occurs at the end of 1974. There is no evidence of a policy change in 1979 or 1980. The hypothesis that these interest rates contain unit roots cannot be rejected. Therefore, tests of the expectations model devised by Campbell and Shiller to take account of unit roots in the data were undertaken, but they revealed no evidence of departures from the expectations model.
Financial Stability, Interest-rate Smoothing and Equilibrium Determinacy
| Author | : |
| Publisher | : |
| Total Pages | : |
| Release | : 2009 |
| Genre | : |
| ISBN | : |
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This paper examines the interaction between monetary policy and financial stability and provides an assessment of the implications of banks' risk management practices for monetary policy. By considering the desire of the central bank to stabilize different types of the "basis" risk as a contribution to financial stability, we derive a set of plausible interest-rate rules characterized by either backward or forward interest-rate smoothing. The paper investigates the determinacy conditions of the rational expectations equilibria obtained under such rules. Contrary to what previously found in the literature, we find that the practice of smoothing interest rates backward does not in general alleviate problems of equilibrium indeterminacy. Moreover, basis risk stabilization may lead to policy rules embedding "forward" interest-rate smoothing, where a new kind of indeterminacy may arise following excessive concern for financial stability.
Market-Based Interest Rate Reform in China
| Author | : China Finance 40 Forum Research Group |
| Publisher | : Routledge |
| Total Pages | : 224 |
| Release | : 2018-12-07 |
| Genre | : Business & Economics |
| ISBN | : 0429889992 |
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The market-based interest rate reform remains a core part of China’s financial reforms, and an important topic of both theoretical and policy studies. This book presents a comprehensive analysis of the process and logic of China’s interest rate reform from a historical perspective. It is structured along three lines, i.e. loosening interest rate controls, establishing market-based interest rates, and building an effective interest rate adjustment mechanism, and systematically reviews the characteristics and evolvement of the reform process. The book further explores the lessons and challenges of the reform by examining China’s development stage and auxiliary reforms needed, and offers policy recommendations on how to further push forward the reform.
Interest Rate Smoothing and Financial Stability
| Author | : R. Todd Smith |
| Publisher | : |
| Total Pages | : 32 |
| Release | : 2004 |
| Genre | : |
| ISBN | : |
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Central banks smooth fluctuations in interest rates based on a belief that this policy promotes financial stability. This belief is based on a presumption that the direct effect of less interest rate volatility on a bank's likelihood of insolvency is the predominant effect of this policy. The main point of this paper is that these policies also give rise to indirect effects that lower financial stability. These indirect effects occur because the policy itself alters bank behavior. In effect, if the central bank provides (liquidity) insurance (at zero premia), it may introduce a classic moral hazard problem that encourages risk-taking by banks. As a result, to maintain a given degree of financial stability, a bank regulator may, in fact, need to impose a higher prudential capital requirement when an interest rate smoothing policy is in place. The paper concludes that the link between interest rate smoothing policy and financial stability may be more complicated than is generally recognized.
Diffusion Estimation and Structural Stability Tests of Short Term Interest Rate Models
| Author | : Sumihiro Takeda |
| Publisher | : |
| Total Pages | : 40 |
| Release | : 2005 |
| Genre | : |
| ISBN | : |
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This paper proposes a simple method for estimating the diffusion function of continuous-time diffusion processes without specifying the drift function structure. This estimation method is suitable for practitioners choosing an interest rate derivative pricing model among the short-term rate type. We estimate the diffusion function parameters by using one-month Euro rates; US Dollar, German Mark, and Japanese Yen. We conduct structural stability tests of the diffusion function parameters and find a statistically significant structural change in the German Mark process. We, however, do not detect structural changes in the US Dollar and the Japanese Yen processes during the same period.
Negative Interest Rate Policy (NIRP)
| Author | : Andreas Jobst |
| Publisher | : International Monetary Fund |
| Total Pages | : 48 |
| Release | : 2016-08-10 |
| Genre | : Business & Economics |
| ISBN | : 1475524471 |
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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.
The Federal Reserve System Purposes and Functions
| Author | : Board of Governors of the Federal Reserve System |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2002 |
| Genre | : Banks and Banking |
| ISBN | : 9780894991967 |
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Provides an in-depth overview of the Federal Reserve System, including information about monetary policy and the economy, the Federal Reserve in the international sphere, supervision and regulation, consumer and community affairs and services offered by Reserve Banks. Contains several appendixes, including a brief explanation of Federal Reserve regulations, a glossary of terms, and a list of additional publications.
