Interest expectations and exchange rates news

Using a new survey data set ofmatched exchange rate and interest rate expectations for eight currencies relative to the German mark, we examine empirically the relationship between exchange rate returns, news and risk premia. News on interest differentials enters significantly in equations for the difference between the spot rate and the lagged forward rate for the British pound, Japanese yen, Spanish peseta and the US dollar. An unexpected rise in the interest rate differential tends to strengthen the domestic exchange rate. For each of these currencies, we also find significant effects of our ex-ante measure of the risk premium. In addition, we investigate the effect of lagged interest rate differentials as proxy for the risk premium and find that they do not capture time-varying risk premia as is widely suggested in the literature, but probably capture a peso-problem, learning about a policy change, a market-inefficiency or a combination of these factors.     

Interest rate expectations and the exchange rate

This paper presents a model of exchange rate reactions to interest rate changes and explains the following complex interactions. An expected interest rate increase induces a current depreciation. If that increase is true in the next period, then the exchange rate appreciates more than the previous depreciation. If the increase is sustained, it leads to a final, though small, depreciation. The model explicitly takes into account capital gains and losses. As far as expectations are concerned, two types of agents are considered (chartist and fundamentalist), and expectations are formed in two different ways (rational and bandwagon effect). Simulations and some empirical evidence for the U.S. dollar support the implications of the model.This paper has benefitted from the comments of the participants at the Forty-Third International Atlantic Economic Conference in London, England, March 11–18, 1997. Financial support from the DGCYT under project PB94-1502 is acknowledged. The comments of the participants at the 1995 American Economic Association Conference on Exchange Rate Determination in Stuttgart, Germany and the 1995 International Symposium on Economic Modeling in Bologna, Italy are also acknowledged. The author is solely responsible for any possible remaining error.     

利率市场化、存款保险制度与银行挤兑

在推进利率市场化的过程中,避免银行挤兑和实现金融体系的平稳运行是中国在转型过程中面临的重要理论和现实问题。本文基于多轮次噪音信息传递市场环境,构建了一个银行挤兑动态模型,通过综合考虑存款者对银行持有资产收益率的预期、信息加工和传播效率以及不同类型的提前取款动机等方面,探讨银行挤兑的动态过程,给出了各轮次银行挤兑的比例和数量,并刻画出相应的动态均衡;进一步通过引入存款保险制度对基准模型进行扩展,探讨实施存款保险制度与银行挤兑之间关系的作用机理。结果表明,实施存款保险制度通过影响存款者的两类提前取款动机,具有稳定预期和道德风险两个方向相反的效应;存款保险制度的实施效果取决于两种效应的力度对比,而两者之间的比较内生于制度环境。得到的政策启示如下:在实施存款保险制度时,需要建立和健全相应的制度建设配套措施,强化市场约束和完善银行内部治理机制的监督作用来减弱潜在的道德风险问题;继续深化金融体制改革,提高信息的加工和传播效率,促使存款者形成稳定的取款预期,从而增强稳定效应。     

The expectations hypothesis, term premia, and the Canadian term structure of interest rates

In this paper monthly data are used over the period 1960:7 to 1995:12 to examine the determinants of term premia implicit in the Canadian T-bill term structure of interest rates. In sharp contrast to U.S. evidence, the conditional variances of Canadian macroeconomic variables are found to be insignificant predictors of term premia in the Canadian T-bill term structure. The conditional variances of U.S. macroeconomic variables, however, are found to be important determinants of Canadian term premia. JEL Classification: E43, G1
L'hypothese des anticipations, les primes de temps et la structure temporelle des taux d'intérêt canadiens. Ce mémoire utilise des données mensuelles de juillet 1960 à décembre 1995 pour examiner les déterminants des primes de temps implicites dans la structure des taux d'intérêt pour les bons du trésor canadiens. Contrairement à ce que l'on trouve aux Etats-Unis, il semble que les variances conditionnelles des variables macroéconomiques canadiennes ne sont pas des prédicteurs utiles de ces primes. Cependant, il appert que les variances conditonnelles des variables macroéconomiques des Etats-Unis sont des déterminants importants de ces primes.     

An empirical note on Euro market interest rates,domestic interest rates and the expectations theory of the term structure

An empirical analysis of recent monthly data for 8 currencies indicates that the performance of the expectations theory to explain the short term maturity spectrum of Euro interest rates is rather good in most cases and that it is not related to the degree of integration of Euro and domestic markets.     

Interest rates and investment coordination failures

The theory of capital developed by Bohm-Bawerk and Wicksell emphasized the roundabout nature of the production process. The basic insight is that production necessarily involves time. One element of the production process is to determine the period of production, or the length of time from the start of production to its completion. Bohm-Bawerk and Wicksell emphasized the role of the interest rate in determining the period of production. In this paper, I develop an option games model of the decision to invest. Two firms have an opportunity to enter a market, but production takes time. Firms face a two-dimensional decision. Along one dimension, they determine the period of production and the prospective profit therefrom. Along another dimension, they determine whether or not they want to enter the market given the amount of time it will take to start generating revenue from production. Within this option games approach, the period of production can be understood as an endogenous time-to-build and I argue that this framework provides a tool for evaluating the claims of Bohm-Bawerk and Wicksell against the backdrop of competition and uncertainty. I evaluate the period of production decision and the option to enter decision when the real interest rate changes. I show that investment coordination failures are more likely to occur at lower levels of profitability when real interest rates are low. I conclude by discussing the implications of low interest rates for boom-bust investment cycles.     

Supply-side effects of exchange rates, exchange rate expectations and induced currency depreciation

Within the context of a small open economy model, this paper examines the repercussions of induced currency depreciation. The results presented in this paper are based on a model with firm microeconomic foundations and which takes into account both the supply and demand-side effects of exchange rate variations. The distinguishing feature of the model is the role of exchange rate expectations. We consider three kinds of expectations; adaptive, extrapolative, and regressive expectations. We also perform several sensitivity tests based on these expectations. Our simulation exercise shows that the effect of induced currency depreciation depends largely on supply-side effects. In most cases, we find that currency depreciation results in (i) a fall in output, (ii) an increase in prices and (iii) an improvement in the balance of trade. In the absence of weak supply-side effects of exchange rates, we find that, if the Marshall-Lerner conditions hold, then depreciation of the home currency has a favorable effect on output but its effect on the balance of trade is negative.     

Interest rates,government purchases and the Taylor rule in recessions and expansions

In this paper we study asymmetries in the Taylor rule for the United States during the 1970–2012 period. We show that monetary authorities have been constantly concerned with excess demand in overheated periods – when the output gap is positive or the unemployment rate falls below 7% or 7.5% – raising the interest rate aggressively in that case. However, the Fed seems more reluctant to decrease the fund’s rate during recessions. On the contrary, monetary authorities react symmetrically and forcefully to inflation in booms and busts. Finally, we provide evidence that an expansionary fiscal policy does not lead to an increase in interest rates, and thus there is not necessary a “crowding-out” effect in recessions.     

利率市场化与商业银行风险承担

在国内利率市场化渐行渐近的背景下,本文基于2007-2013年国内88家商业银行数据,运用双边随机前沿模型,分析商业银行风险承担.实证结果显示:样本期间内国内商业银行总体风险承担水平低于最优风险承担水平;随着利率市场化的推进,国内商业银行总体风险承担呈下降趋势,其中,大型商业银行下降的最为明显,而股份制银行和区域性银行却呈上升趋势.     

Survey Data and the Interest Rate Sensitivity of US Bank Stock Returns

In this paper, we provide empirical evidence on the interest rate sensitivity of the stock returns of the twenty largest US bank holding companies. The main contribution of the paper is the use of survey data to model the unexpected interest rate variable, which is an alternative approach to the existing literature. We find evidence of significant negative interest rate sensitivity during the early 1980s, and evidence of declining significance in the late 1980s and early 1990s. This result is also obtained when using the forecast errors of ARIMA processes to model the unexpected movement in the interest rate.     

Confident expectations, rational expectations and the optimal conduct of monetary policy

Under what conditions central banks can afford to deviate from announced targets without losing their reputation is analyzed. For this, the public must have something like ‘confident expectations' vis-a-vis monetary policy and central banks have to behave accordingly. The paper shows that it can be rational for the public and welfare-increasing for the society to retain ‘confident expectations' instead of switching to rational expectations, when central banks have gained long-run reputation. At the end of the paper, alternative optimal money supply rules are compared in a dynamic optimization framework. © 1998 Elsevier Science B.V. All rights reserved.     

Learning,expectations, and the cobweb model

Conclusions The conclusions which may be drawn from this essay are modest, but they merit reiteration. There are two basic modifications of the simple cobweb model which appear to be useful. On the one hand, the learning-behavior hypothesis serves as a stabilizer. On the other, unilateral coupling provides a method of maintaining fluctuations in an otherwise stable model. When the two are combined, one obtains a modified cobweb which may be both a more useful empirical, and a more suggestive theoretical, model of individual markets. On these grounds, it seems reasonable to suggest that the cobweb may see thirty more years of useful service.With 6 Figures     

Interest rates and the fisher effect in India: An empirical study

This study throws light on the importance of adjustment lags, variability of inflation, changes in real income, etc. in the empirical estimation of Fisher hypothesis. Variability of inflation has a significant negative impact on both short- and long-term interest rates in a developing economy like India. The ‘Philips Curve Effect’ has not been operative in a developing country.     

利率市场化进程中欠发达地区银行利率定价行为

国内商业银行的经营特征和收入结构已经反映出存贷款利率的重要性,欠发达地区商业银行的经营尤其依赖于存贷利差收入。在当前利率市场化进程中银行如何进行利率定价日益成为重要课题。对此,本文通过建立特定时期的欠发达地区商业银行利率定价的行为模型,对不同情景下的利率定价进行理论分析,进而明晰商业银行现行利率定价选择的根本缺陷,提出了最优利率定价策略及其实现路径。     

中国商业银行利率风险管理的约束与行为选择

中国商业银行为什么存在着利率风险管理的弱化?这种选择是否满足于商业银行在约束条件下最优的理性行为? 本文通过对中国商业银行利率风险管理的具体约束条件的分析,从成本收益角度,在理论上解释了中国商业银行行为的理性选择.     

Externalities, expectations, and growth

Summary. The paper studies a model of accumulation and growth where a continuum of heterogeneous firms play dynamically optimal strategies along a (rational expectations) equilibrium. The key feature of the model is that firms' technological decisions are assumed subject to both friction and external effects. This gives rise to a wide multiplicity of equilibrium behavior, any path of sustained growth requiring that the economy tackle a never-ending chain of fresh coordination problems. This setup is modelled as a (non-atomic) dynamic game, suitable conditions being provided that partially characterize when sustained growth is a possible (never the unique) equilibrium outcome. Received: May 25, 1995; revised version: March 25, 1998     

Forward rates and the expectations theory of the term structure: Tests for the Federal Republic of Germany

The expectations theory of the term structure was tested using data from West German capital and money markets for the period 1975:01–1986:12. If forward rates implicit in the term structure are market expectations of future spot rates, and if term premia are not time-dependent, then forward rates should follow a martingale sequence. This hypothesis was tested with the aid of standard time series techniques (autocorrelation functions, Box-Pierce, unit-roots,F-tests and co-integration). The expectations theory was for the most part rejected, although the martingale property, or equivalently, weak form efficiency, held for the latter part of the test period. The rejection of the simple expectations theory is consistent with the hypothesis of time-varying term premia. The author thanks an anonymous referee and especially Prof. Dr. J. Wolters (Free University of Berlin) for helpful comments and criticism.