Cash Rate Research Articles

The pass-through effect of the Reserve Bank of Australia's cash rate on deposit and lending rates

Using a multiple-threshold regression model and monthly data (April 1982−July 2024), we analyze the Reserve Bank of Australia's cash rate pass-through effects on lending and deposit rates. For lending rates, pass-through is symmetric when the cash rate is below 4.75%. However, at certain cash rate levels, mortgage and small business rates shoot up like rockets but fall like feathers. No asymmetry was detected in deposit rates, suggesting a symmetric response to changes in the cash rate. These findings have important implications for regulatory bodies, highlighting specific cash rate levels and corresponding lending or deposit rates that may require closer scrutiny.

Clinical features, hemorrhage risk and epilepsy outcomes of familial cerebral cavernous malformation: A 20-year observational pragmatic single-center study

IntroductionFamilial Cerebral Cavernous Malformations (fCCMs) are rare, hereditary conditions characterized by multiple central nervous system lesions. Despite their rarity, CCMs can cause significant clinical challenges when symptomatic, manifesting as seizure and symptomatic hemorrhage (CASH). Guidelines suggest neurosurgical intervention for symptomatic or previously symptomatic lesions, while conservative management is recommended for new-onset epilepsy. However, the natural history and optimal management remain unclear, necessitating further research. ObjectiveThis study aims to provide a comprehensive analysis of the clinical features, hemorrhage risk, and epilepsy outcomes in fCCM patients over an extended follow-up period, offering a more precise estimate of CASH and epilepsy rates in this population. MethodsThis retrospective longitudinal cohort study included fCCM patients enrolled from 2001 to May 2024. Data collected included demographic information, new neurological symptoms, symptomatic hemorrhages, seizures, and modified Rankin Scale (mRS) scores. Incidence rates of first symptomatic events and Kaplan-Meier survival curves were calculated, with logistic and Cox-proportional hazard regression models used to evaluate outcomes. ResultsA total of 47 patients were included in this study, with a mean age at diagnosis of 37.51 years. At diagnosis, 68 % were symptomatic, with 30 % having CASH and 36 % experiencing seizures without CASH. During a median follow-up of 126.0 months (interquartile range, 110.5 months), 17 % had a new CASH event, 20 % had seizures without CASH, and 60 % remained asymptomatic. The bleeding rate was 1.02 % per patient-year, with new focal neurological symptoms at 2.045 per 1000 patient-years and new CASH at 10.225 per 1000 patient-years. Most patients maintained minimal or no disability (mRS 0 or 1). Presenting with epilepsy at baseline significantly increased the odds of future seizures (OR 18.13, p = 0.001). ConclusionThis study highlights the complex presentation and progression of fCCMs, emphasizing the necessity for long-term monitoring. Baseline epilepsy is a significant predictor of future seizures, underscoring the need for individualized management strategies. Future research with larger cohorts and standardized criteria is essential to refine the understanding and management of fCCMs.

Internal and External Factors on Profitability of Islamic Banks in Indonesia Mediated by Operating Expenses Operating Income (Period 2013 to 2023)

Lucrativeness is a vital element for evaluating Islamic banks' monetary achievement. It's critical to grasp the determinants that influence Indonesian Islamic banks' lucrativeness. The objective of this examination is to explore the factors—such as problematic financing, financing to store ratio, currency rates, price rises, and operational proceeds as an intermediary variable—that impact the productivity of Islamic banks in Indonesia. This research intends to provide choice makers in the Islamic fiscal industry a more comprehensive discernment of the budgetary operation of Islamic banks by scrutinizing these guidelines. This research methodology uses a panel data approach using secondary data from Islamic banks in Indonesia. Through panel data analysis, this study examines the effect of these variables on the profitability of Islamic banks. The conclusions showed that, in Sub-structural I, Financing to Deposit Proportion (FDR) favorably affects the productivity (ROA) of Indonesian Islamic banks, while Non-Performing Financing (NPF), Currency Ratios, and Rising Prices have no consequence on operational expenses operational proceeds (BOPO). As indicated by sub-structural II, profitability is impacted by inside factors (NPF and BOPO), outer variables (expansion and cash rates) have no significant effect on productivity, and financing to store proportion (FDR) has no impact on productivity. In this examination, the BOPO fills in as a mediating variable that just intercedes the effect of the Financing to Deposit Ratio on Lucrativeness. Concerning the other autonomous factors, it has no bearing. Other than featuring the significance of hazard relief and operational effectiveness in accomplishing positive monetary outcomes, this exploration illuminates the variables influencing the productivity of Islamic banks in Indonesia.

Modelling Exchange Rates and PMS Prices Impact on Inflation in Nigeria (1985-2020): A Regression Analysis

On the rise in Premium Motor Spirit (PMS) prices and cash rates, a conventional least squares analysis was used to determine the relationship between the respondent variable, inflation, and the explanatory variables, PMS price and exchange rate. According to the results, as evidenced by the conventional least squares regression, the PMS price and money rate were significant drivers of inflation, accounting for about 88% of the fluctuation in inflation. Additionally, the Breusch-agnostic test revealed that the residuals of the direct regression model were not heteroscedastic, and the ACF and PACF tests revealed that the error terms did not have autocorrelation. The Jarque-Bera ordinariness test was used to express the perceived background noise as normal. As demonstrated by the findings, the increase in the price of PMS and the decline in the value of the Naira influenced Nigerian inflation. Finally, based on the research econometric outcomes and interpretations, the study discussed the policy implications of these findings and offered recommendations. For future work, research should be conducted on energy transition and efficiency.

Cascade model for Australian housing

AbstractWe design a ‘cascade model’ that integrates projections for Australian housing with inflation, incomes and asset markets over long horizons. The model allows simulating joint ‘paths’ for inflation, wages, cash rates, mortgage rates, rents, rental yields, house prices and fund returns. The cascade model structure ensures that equilibrium relationships are maintained between the variables when projecting over very long time periods. It achieves this through linking either growth rates or levels for variables in a manner that ensures consistent trends emerge within each simulated path over the very long‐term, thus avoiding excessively divergent behaviour between variables with common underlying fundamentals.

THE NEW ZEALAND EXPERIENCE OF THE TRANSITION TO THE INFLATION TARGETING REGIME AND ITS FEATURES

The article examines the New Zealand experience of the transition to inflation targeting. In particular, the necessity and reasons for New Zealand’s transition to this regime were analyzed. When adjusting inflation expectations, the Reserve Bank’s activities in cooperation with the government were taken into account. The influence of the official cash rate on market rates was also studied. In addition, the exchange rate of the “Comfort zone” and the “Trade Weighted Index” were studied as part of the monetary policy. As part of open market operations, the Reserve Bank’s “Quantitative easing” instruments were analyzed.

Estimating the Effects of Monetary Policy in Australia Using Sign‐restricted Structural Vector Autoregressions*

I estimate the effects of Australian monetary policy using a structural vector autoregression identified using a variety of sign restrictions and a prior‐robust approach to Bayesian inference. Some identifying restrictions are not particularly informative. However, combining the restrictions allows us to draw useful inferences. The estimates suggest that an increase in the cash rate lowers output and consumer prices at horizons beyond a year or so. The results are consistent with the output response to a 100 basis point increase in the cash rate lying towards the upper end of the range of existing estimates.

The Research Development of Tax Avoidance: A Literature Review

This study looks at ninety articles about tax avoidance from seventy well-known national and international journals. This study looked at articles about tax avoidance from 2017 to 2022 and put them into groups based on the subject and method. China Journal of Economics, Management, Accounting, Journal of Accounting Studies, Journal of International Accounting, Auditing, and Taxation the International Journal of Innovation, Creativity, and Change has published most of the articles about avoiding taxes. The results of this study show that from 2017 to 2022, corporate governance, political connections, profitability, corporate social responsibility, and earnings management will be the most common ways for companies to avoid paying taxes. Most articles about tax avoidance have been published in the China Journal of Economics, Management, and Accounting, the Journal of Accounting Studies, the Journal of International Accounting, Auditing, and Taxation, and the International Journal of Innovation, Creativity, and Change. The results of this study show that from 2017 to 2022, corporate governance, political connections, profitability, corporate social responsibility, and earnings management will be the most common factors related to tax avoidance. Between 2017 and 2022, researchers will use the quantitative method the most, while the effective cash rate will be the most common way to measure tax evasion. This study has limitations, including the fact that it only includes data from 2017 to 2022.

Developments in Australian Bank’s Funding Costs and Lending Rates

This paper focuses on the funding costs and the lending rates of banks in Australia. As the world emerges from the COVID-19 pandemic, more and more countries need to change their financial policies to fit the new situation. In this trend, the central bank of Australia, which is the Reserve Bank of Australia, plans to increase its cash rate to stop or reduce the starting rate of inflation. Through analyzing the report from the Reserve Bank of Australia (RBA) and articles from related academic works of literature, this writer found some points to understand, evidence, and analyze. It also analyze the importance of the Australian central bank to change the cash rate. After analysis, the result shows that due to the change in the confidence of customers and the increase of the rate of inflation after the COVID-19 pandemic, the central bank had to increase the cash rate. Through tighter financial policies, the central bank planned to stabilize the economy of Australia. Meanwhile, the pressure of Australian banks grew as the funding cost increased and the requirement for home mortgage loans decreased. For future research on the cash rate, it is advised to evaluate that if the continuous increases in cash rate are overused in the future. This might need at least half a year or even longer time to wait for the impact of the policy and the effect on the market and the banks.

Housing Price and Interest Rate Hike: A Tale of Five Cities in Australia

Australian housing prices are reported to be overvalued and unaffordable for the past two decades. Many researchers and practitioners have attributed the persistent growth in housing prices to the prolonged period of low borrowing costs. However, due to inflationary pressure, the Central Bank has raised its cash rate consecutively in recent months. This paper aims to examine whether interest rate rises affect housing price in different parts of Australia. Evidence generated from the analysis reported bipolar results between the large and smaller cities, whereby housing prices in Sydney and Melbourne show a significant negative relationship with interest rate changes while Brisbane and the Gold Coast and Perth and Adelaide, respectively, are showing negative but insignificant results during the study period. Short-run trend projections on housing prices indicate that Sydney, Melbourne, Brisbane and the Gold Coast are on a downward trend while Adelaide and Perth will maintain its current momentum before plateauing out later next year. Likewise, control variables, such as oil prices, inflation rate and stock market performance, are found to be related to housing prices in larger cities only. These findings have implications on housing policy, house purchase decisions and investment portfolio management strategy.

Assessing Australian Monetary Policy in the Twenty‐First Century*

Using the Reserve Bank of Australia's MARTIN model, we compare actual monetary policy decisions with a counterfactual in which the cash rate is set according to an optimal simple rule. We find that monetary policy played a crucial role in avoiding a potential recession in 2001 and mitigating the downturn in 2008–09. By contrast we find that the cash rate was too high during 2016–19, keeping inflation below the Reserve Bank's target band. Optimal monetary policy in 2016–19 would have involved a substantially lower cash rate and produced significantly better employment outcomes.

Inflation Targeting in New Zealand: Does Policy Match Practice?

In this paper, I primarily seek to empirically test whether or not the Reserve Bank of New Zealand (RBNZ) is systematically acting in accordance with their stated monetary policy goal of achieving medium run price stability. In this pursuit, I utilize a series of threshold regressions and vector autoregressions to test responsiveness of the Official Cash Rate to projected inflation deviations from the RBNZ’s stated inflation target. Comfortingly, I uncover strong evidence that the RBNZ is in fact systematically setting policy in accordance with their stated policy objective of medium run price stability.

GIS techniques to analyze factors associated with crash occurrence

Fatality rates in Kentucky have been higher than the national average for the past decade. Prior research postulated that the region’s unique socioeconomic conditions could provide a compelling explanation of the higher cash rates of the southeast in the US. This study examines the relationship between safety and socioeconomic characteristics using an extensive spatial analysis of crashes in Kentucky. Quasi-induced exposure technique was utilized to determine the crash propensity of different driver groups. Through a series of GIS techniques and spatial analysis, the relative accident involvement ratios were calculated for each group of drivers. The findings of the study concur with the previous findings between driving behavior and demographic factors such as age and gender. The study also attempted to explain the regional disparities in crash occurrence across the state in terms of economic status. The study concluded that the drivers residing in the Appalachian regions have a higher propensity to cause a crash, regardless of the age and gender of the driver. The findings of the study can be used to identify high risk counties for the Safety Circuit Rider (SCR) program in Kentucky.

Does foreign monetary policy drive Australian banks' wholesale funding costs?

In this paper, we analyze whether Australian banks' wholesale funding (WF) costs are driven by foreign monetary policy. Using data for 2000–2015, we find that in aggregate, WF costs are not directly affected by the Reserve Bank of Australia's cash rate, except for issues in Australian dollars. The impact is indirect, through the yield of Australian government bonds. WF costs for issues in non-Australian currencies (except Japanese yen) depend on foreign monetary policy. The paper also shows that WF costs do not depend on the volatility index and exchange rates. Our results have implications for regulators and monetary-policy makers.

How stock markets reacted to COVID-19? Evidence from 25 countries

The objective of this paper is to analyse how COVID-19 related government policies influenced stock markets. Of the 25 countries we consider, stock returns did not react to any of the three policies – the stimulus package, lockdown, and travel ban in 20% of countries. For around 48% of countries, the effect on returns was negative, due largely to the stimulus package and lockdown policies. Of the 13 countries that experienced a change in the cash rate, returns were negative for 46% of the markets. The travel ban had the least effect on stock returns.

Measuring the effect of negative interest rate on New Zealand banks

We derive an equilibrium lending and deposit rates from a constrained profit optimization model, and estimated them over the period from 1999 to 2020. Then, dynamic stochastic baseline projections of these equilibrium rates and bank profit, and their projections under a counterfactual scenario of a negative interest rate, were produced for the period 2020–2024. The model predicts that a negative official cash rate (OCR) lowers the lending and deposit rates on average over the period Jun 2020 to Dec 2024; but the lending rate is higher than the deposit rate. It also increases the volatility of these rates relative to baseline projections. Negative OCR increases both incomes and costs; however, bank profit increases on average, by about 19% relative to baseline projections over the period Sep 2020 to Dec 2024. However, that increase of bank profit is associated with more uncertainty.

The Company's Working Capital during the Covid-19 Pandemic to Increase the Profitability Limited Company Telkomsel in Makassar City

This study aims to determine the optimization of working capital in increasing the profitability of Limited Company Telkomsel. The research method used is descriptive with a quantitative approach using financial statement data sources for the three years 2017 to 2019. This research uses observation data collection techniques, questionnaires and documentation. Descriptive analysis method and inferential statistical analysis with financial ratio analysis by comparing the current ratio with the ratio in the previous year. From the analysis and discussion results indicate that Limited Company Telkomsel, experienced that the overall working capital management was not optimal from 2017 to 2019. Working capital management could not run optimally because of the working capital turnover that occurred at Limited Company Telkomsel only reached the highest number of 4.42 times, while looking at the lowest cash turnover in 2019 which reached 2.61 times. Turnover of working capital at Limited Company. Although it is considered that Telkomsel has a fairly optimal cash and receivable turnover rate, this has not been able to significantly increase the company's profitability compared to previous years.

Modelling the Reserve Bank of Australia's Policy Decisions and the Case for a Negative Cash Rate

AbstractTaylor's eponymous ‘rule’ models how central banks set policy rates in response to inflation and output. We estimate a Taylor rule for the Reserve Bank of Australia (RBA), modifying it to make it more realistic, while retaining its simplicity. The model implies that if the Bank responds to recent forecasts as it has on average since 1995, the cash rate could have briefly gone negative in 2020. But the RBA is wary of negative cash rates. There are grounds for caution; the economic outlook is particularly uncertain and the economy's response to negative rates is uncharted territory.

Nakit Akış Tablosu ile Likidite Oranları İlişkisi: Borsa İstanbul KOBİ Sanayi İşletmeleri Üzerine Bir Araştırma (Relationship between Cash Flow Statement and Liquidity Ratios: A Research on Borsa İstanbul SME Industrial Enterprises)

Purpose – In the study, it is aimed to determine whether there is a relationship between the cash flows expressed as liquidity criteria of the enterprises and the liquidity ratios, and if any, the level and direction of this relationship. Design/methodology/approach – The sample of the research consisted of 40 companies whose data can be accessed continuously, operating in the Borsa Istanbul SME Industry Index. The data related to the companies subject to the research were obtained from Borsa Istanbul and Public Lighting Platform official websites and made ready for analysis. Correlation analysis, panel unit root tests, panel regression analyzes and causality analyzes were performed to achieve the purpose of the research. Findings – As a result of the analysis, it has been determined that there is no statistically significant relationship between cash flows obtained from operating activities, investments and financial activities and liquidity ratios. In addition, according to the results of the panel causality analysis, it has been determined that cash flows are a cause of the current rate with two delays, but cash flow variables are not a cause of the cash rate. Discussion – As a results of the research, it has been revealed that the balance sheet and cash flow data should be evaluated together in order to reach more accurate results in the liquidity analysis.

Cross-border DCF valuation: discounting cash flows in foreign currency

The paper seeks to develop a comprehensive framework to cross-border discounted cash flow valuation. Although the literature on company valuation and on international financial management is vast, such a framework has not yet been proposed. We build upon well-known fundamentals and relevant contributions, e.g. on the derivation of the risk-adjusted rate of return. Relevant risks are exchange rate risk, business risk, financial risk, the risk of the tax effects induced by debt financing, and the risk of default. Additional tax effects beyond the well-known tax shield on interest expenses must be considered. Risk discounts from cash flows and risk premia to be added to risk-free interest rates are derived according to the global capital asset pricing model. A conceptual choice occurs not only between the foreign currency and the home currency approach, but also regarding the estimation of future exchange rates. The paper shows how a valuation can be implemented with or without consideration of covariances between cash flows and rate of returns with exchange rates. It also derives the discount rates if forward exchange rates are applied. We discuss the consequences of assuming the uncovered interest parity to hold. We assume deterministic debt and apply the adjusted present value approach. In addition, we derive the RADR to be used in the flow to equity and weighted average cost of capital approach. The paper addresses not only the valuation of a foreign company, but also the valuation of a domestic company that generates cash flows in foreign currency and/or uses debt in foreign currency.