The Structural Relation Between Mortgage and Market Interest Rates

This paper analyzes the dynamic relationship between primary and secondary mortgage markets and the short-term and long-term market interest rates. Using a series of monthly data on fixed rate mortgage rates and GNMA rates, we explore the dependence and speed of adjustment in these primary and secondary mortgage rates to each other as well as to the long and short-term government rates. The results indicate that residential mortgage rates in general, appear to follow the long-term rate and are not very sensitive to movements in the short-term interest rate.     

Interest Rates and Exchange Rate Movements: Analyzing Short-term Investments in Long-term Bonds

Tests of the uncovered interest rate parity (UIP) are subject to various data problems when long-term interest rates are applied: due to the long investment period, time intervals for measuring exchange rate movements are usually overlapping and therefore not independent. This shortfall can be prevented by considering short-term investments in long-term bonds instead of investments to maturity. This article analyzes the explanatory power of long-term interest rates with regard to 1- and 3-month exchange rate movements by relating return differences from 1- and 3-month investments in domestic and foreign 10-year government bonds to nine different exchange rates. From a Swiss perspective, there is only weak support for an interrelation between return differences and the corresponding exchange rate movements, whereas from a US perspective, the resulting estimates are much more in line with UIP.The reader may for instance consider Engel (1996) and Froot and Thaler (1990).     

The Impact on Interest Rates of Unemployment Announcements and Their Revisions

The announced changes in monthly employment reports and in weekly new unemployment claim reports are based on new levels and on revisions to previous levels. We analyze the effect on interest rates of surprises to these two separate components of the changes. We find that for weekly reports the effect on interest rates of the new level is greater than the effect of the revisions. For monthly employment reports, the two components’ effects have similar strength.     

Tax Clientele Effects in the Term Structure of UK Interest Rates

This paper tests for tax clientele effects in the term structure of UK interest rates. Five empirical models of the term structure of interest rates, incorporating tax effects, are estimated with daily data covering the period 31 March, 1995 to 3 August, 1995. In May 1995, the British government announced its intention to eliminate the tax exemption on capital gains from government bonds, but subsequently in July 1995 backtracked on some of its initial proposals. This period therefore forms the basis of a crude natural experiment in the sense that it provides an opportunity to examine tax clientele effects 'before' and 'after' an event which should have levelled greatly the taxing of government bonds. The empirical analysis suggests large tax clientele effects. However, there is little evidence of tax-specific term structures of interest rates.     

如何破解人民币国际化中的特里芬难题--让利率和汇率回归常态

任何一国主权信用货币在国际化过程中都会面临特里芬难题,而人民币国际化中的特里芬难题有其特殊性,如何破解这一难题值得我们深入考虑。文章从分析中国投资驱动、出口导向的增长模式入手,提出中国应尽快打破经济僵局和转变增长方式,让利率和汇率回归常态。更进一步地,文章认为中国应继续完善人民币的国际货币发行机制,同时较为稳步的推进资本项目可兑换。     

Integration of International Long-Term Interest Rates: A Fractional Cointegration Analysis

In this study, we re-examine the relationship among interest rates on the long-term government bonds of five industrialized countries. Using both the variance ratio test and fractional cointegration analysis, we find significant evidence that indicates the five government bond rates are fractionally cointegrated. In specific, our results show that the error correction term of the system of the five interest rates follows a mean-reverting, fractionally integrated process.     

Lower Bound Uncertainty and Long-Term Interest Rates

Nominal interest rates are constrained by an effective lower bound, but the level of the lower bound is uncertain. This paper uses a simple shadow rate term structure model to study how lower bound uncertainty affects long-term interest rates. A decline in lower bound uncertainty, in the sense of a mean-preserving contraction, is associated with a drop in expected short rates. The effect on the variance of short rates, and hence the term premium, is ambiguous. A calibration to Canadian data suggests that a decline in lower bound uncertainty is associated with a modest drop in interest rates.     

REIT Risk Premium Sensitivity and Interest Rates

This analysis investigates several aspects of the relationship between daily REIT stock risk premiums and various interest rates. Consistent with prior research, the general findings indicate that interest rates do impact REIT returns. This study specifically finds that stock returns are more sensitive to maturity rate spread between short- and long-term treasuries than the credit rate spread between commercial bonds and treasuries. In addition, the analyses document a structural model shift during the nineties that has made REITs more sensitive to credit risk. In additional to change in investor clientele, an analysis of declining REIT credit-worthiness points to a root cause for this shift.     

Have the Doors Opened Wider? Trends in Homeownership Rates by Race and Income

Homeownership among U.S. families increased notably in recent years, from 63 percent in 1989 to 66.2 percent in 1998. This article examines this trend and the factors contributing to it. We find that (1) homeownership rose for all racial, ethnic, and income groups; (2) the differences in homeownership between minority and nonminority families and between middle-income and lower-income families declined significantly; and (3) changes in family-related characteristics explain homeownership trends among only the top two income quintiles. Among the lower two income quintiles, family-related characteristics explain almost none of the increase in homeownership. This pattern suggests that the favorable economic climate of the last decade, changes in mortgage and housing markets, and changes in the regulations governing those markets account for the increase in homeownership among lower-income families.     

The Term Structure of Interest Rates: Bounded or Falling?

This short paper resolves an apparent contradiction between Feldman's (1989) and Riedel's (2000) equilibrium models of the term structure of interest rates under incomplete information. Feldman (1989) showed that in an incomplete information version of Cox, Ingersoll, and Ross (1985), where the stochastic productivity factors are unobservable, equilibrium term structures are ``interior' and bounded. Interestingly, Riedel (2000) showed that an incomplete information version of Lucas (1978), with an unobservable constant growth rate, induces a ``corner' unbounded equilibrium term structure: it decreases to negative infinity. This paper defines constant and stochastic asymptotic moments, clarifies the apparent conflict between Feldman's and Riedel's equilibria, and discusses implications. Because productivity and growth rates are not directly observable in the real world, the question we answer is of particular relevance.     

Corporate Interest Rates and the Financial Accelerator in the Czech Republic

We analyze the determinants of corporate interest rates and the financial accelerator in the Czech Republic. Using a unique panel of 448 Czech firms from 1996 to 2002, we find that selected balance sheet indicators significantly influence the firmspecific interest rates. Debt structure and cash flow have significant effects on interest rates, whereas indicators on collateral play no significant role. Monetary policy has stronger effects on smaller firms than on medium-size and larger firms. Finally, we find no asymmetric effects in the monetary policy over the business cycle.     

The Relationships Between Mortgage Rates and Capital-Market Rates Under Alternative Market Conditions

Mortgage interest rates have become more integrated with other capital-market interest rates over recent decades, apparently as a result of the deregulation of financial markets. The link is both imperfect and time-varying. Mortgage rates during some time periods appear to be sticky with respect to their adjustment to changes in capital-market rates. We examine the relationship between weekly conventional mortgage rates and the interest rates on treasury and corporate securities under differing market conditions. We draw three conclusions based on the analysis. First, deregulation changed the link between mortgage rates and riskless interest rates, which confirms the findings of Goebel and Ma (1993). Second, mortgage rates were cointegrated with risky interest rates even before deregulation. Third, the link between mortgage rates and the risky bond rate can be associated with the behavior of the risk premium in the bond rate. The observed relationship is consistent with the stickiness observed by Haney (1988) and causes a more pronounced stickiness when rates are falling than when they are rising.     

Regional and State Variation in Homeownership Rates; or If California's Home Prices Were as Low as Pennsylvania's Would its Ownership Rate be as High?

There are significant disparities in homeownership rates across the regions and states of the United States. The causes of these disparities are determined within a standard probit model of the individual homeownership decision where the micro-level observations are aggregated to the regional level. Factors which play a significant role at the individual level are evaluated for their ability to explain regional differentiation. The relative price of owning and renting plays a major role as do other market level determinants. Individual demographic characteristics are not as important with the exception of those related to the immigration and citizenship status of the household head.     

Accounting-Based Valuation with Changing Interest Rates

This paper generalizes Ohlsons [Contemporary Accounting Research Vol. 11 No. 2. 661–687 (1995)] equity valuation framework to allow for stochastic interest rates. Much of this analysis initially deals with the specialized setting in which earnings suffice for cum-dividend value. In such a case, the beginning-of-period (lagged) rate determines the capitalization factor, not the current rate. The underlying earnings dynamic modifies the traditional random walk model via an additional term, namely current earnings multiplied by the percentage change in interest rates. The general model retains these basic aspects of the earnings-sufficiency setting. Empirical implications bear on the returns-to-earnings regression: The earnings-response coefficient decreases as the beginning-of-period rate increases.JEL Classification: M41, G12     

利率期限结构理论研究综述

本文主要对利率期限结构的理论研究做综述,以20世纪70年代初和90年代末为分界线,70年代以前称为传统的利率期限结构,主要以描述性研究为主;70年代以后称为现代利率期限结构,主要以随机模型研究为主;从20世纪90年代末,开始了两极分化发展。本文分为三个部分：第一部分对20世纪70年代之前传统利率期限结构的描述性理论作了概括;第二部分是现代利率期限结构的定量模型,包括均衡模型和无套利模型;第三部分则主要介绍20世纪90年代末以来的一些最新研究进展,包括市场模型和宏观金融模型等。     

Interest Rates and Credit Risk

This paper explores the effects of shifts in interest rates on corporate leverage and default in the context of a dynamic model in which the link between leverage and default risk comes from the lower incentives of overindebted entrepreneurs to guarantee firm survival. The need to finance new investment pushes firms' leverage ratio above some state‐contingent target toward which firms gradually adjust through earnings retention. The response to interest rate rises and cuts is both asymmetric and heterogeneously distributed across firms. Our results help rationalize some of the evidence regarding the risk‐taking channel of monetary policy.     

Interest Rates and the Market for New Light Vehicles

We study the impact of interest rate changes on the demand and supply of new light vehicles in an environment where consumers and manufacturers face their own interest rates. Interest rate changes impact the auto market through both households and manufacturers. For the impact of rate changes on price and output growth, the household channel is quantitatively more important. A 100 basis‐point increase in both interest rates causes annual growth rates of production to fall from 1.0% to ?11.0% and sales to fall from 1.0% to ?2.9% in the short run.     

利率市场化改革的制度分析和国际经验借鉴

利率市场化改革，既有渐进模式，亦有激进模式。虽然实践表明激进式改革模式没有成功的先例，而渐进式改革多数取得了成功。但本认为，利率市场化改革成功与否，固然与改革的具体模式有关，但关键还在于改革的过程中是否改善和提升了本国的制度环境。在此基础上本对我国利率市场化改革的进程提出了有关的政策建议。     

GSEs,Mortgage Rates,and the Long-Run Effects of Mortgage Securitization

Our paper compares mortgage securitization undertaken by government-sponsored enterprises (GSEs) with that undertaken by private firms, with an emphasis on how each type of mortgage securitization affects mortgage rates. We build a model illustrating that market structure, government sponsorship, and the characteristics of the mortgages securitized are all important determinants of mortgage rates. We find that GSEs generally—but not always—lower mortgage rates, particularly when the GSEs behave competitively, because the GSEs implicit government backing allows them to sell securities without the credit enhancements needed in the private sector. Using our simulation model, we demonstrate that when mortgages eligible for purchase by the GSEs have characteristics similar to other mortgages, the GSEs implicit government-backing generates differences in mortgage rates similar to those currently observed in the mortgage market (which range between zero and fifty basis points). However, if the mortgages purchased by GSEs are less costly to originate and securitize, and if the GSEs behave competitively, then the simulated spread in mortgage rates can be much larger than that observed in the data.     

A Simple Multi-Factor,Time-Dependent-Parameter Model for the Term Structure of Interest Rates

In this paper, we present a simple version of the Duffie and Kan model (1996). Our model can perfectly fit the yield curve and the volatility curve and further provide true closed form solutions to the pure discount bond price and its European contingent claims. Due to the specific factor structure in our model, the calibration exercise is easy to implement. This advantage will improve the computational efficiency in pricing American style claims.