Demand For Loanable Funds Research Articles

Nigeria’s Fiscal Performance: Exploring the Role of Exchange Rate

The paper offers empirical justifications for the instrumentality of external sector in influencing the fiscal position of a country through the exchange rate. In the study, ARDL bounds test approach to cointegration analysis is adopted to examine the long run and short run relationship between exchange rate and fiscal performance in Nigeria. The validity of the findings is based on time series data between 1981 and 2017. The emerging evidence reveals that the exchange rate movement has a substantial influence on the fiscal performance, as there exists a significant adverse relationship between exchange rate and fiscal deficit in the long run as well as in the short run, while the association between exchange rate and public debt is found to be significantly positive in both periods. Empirical elucidations posit that an appreciation of the exchange rate could lead to decreasing fiscal deficits. However, the exchange rate appreciation might not induce a reduction in public debt, as it could stimulate demand for loanable funds by the government, although such effect could be mitigated through strategic investment policy and subsidized funding schemes to aid domestic production. Given that fiscal performance is considerably driven or constrained by the exchange rate movement, the study suggests that developing a strategic framework for ensuring a realistic exchange rate and the mitigation of regular fluctuations or correcting inappropriate exchange rate is crucial.

Regulatory Capital Requirements and Capital Buffers: An Examination of the Australian Banking Sector

Using a unique but confidential database, this study examines the capital management practices of Australian banks under the Basel regulatory framework. We find evidence of a significantly negative relationship between the internally targeted capital buffers of banks and the state of the business cycle. This finding supports the view that the capital conservation buffer and countercyclical capital buffer under the Basel III rules are necessary reforms to address the tendency of banks to manage their capital buffers in a pro-cyclical fashion. However, we also find evidence of forward-looking behaviour by bank managers that is likely to dampen the impact of fluctuations in credit market conditions on their lending activities: Banks set higher capital targets when economic activity is gathering momentum and the demand for loanable funds is increasing.

Private Investment and the Demand for Loanable Funds in the Greek Agricultural Sector

The ready availability of credit on easy terms has proved to be instrumental in stimulating agricultural investments until the 1970s. After that period, there was a marked slow-down in investment activity, a trend that characterized the entire Greek economy. This is primarily due to the fact that since then credit had been increasingly tight. The aim of this article was to quantify Greek farmers’ investment behavior both at the aggregate level and by broad type of investment and, also to quantify their demand for loans to finance this investment. Thus, a simultaneous equations econometric model was used to describe the demand for credit and investment by Greek farmers. In particular, credit needs for agricultural investment were estimated using a combination of a partial adjustment model and the adaptive expectations model. Farmers’ investment behavior was examined by employing a synthesized traditional model for aggregate and three types of investment. The rational expectations model was alternatively used. The traditional model was estimated by the 2SLS method and the rational expectations model by the generalized method of moments. Then, the empirical results derived from the rational expectations model were compared with those obtained from the application of the traditional model. Finally, the main findings were summarized and some policy implications were drawn.

A capital budgeting model of the supply and demand for loanable funds

In the general case, machines have a finite life span and are funded, explicitly or implicitly, by a series of equal annual payments for interest and repayment of principal. The demand curve for loanable funds by neoclassical firms and the corresponding supply curve are derived in this paper. It is advantageous to graph both curves against the annual repayment per dollar of loanable funds rather than against the rate of interest alone. Although supply and demand curves are often related to the rate of interest, the area defined by points on such curves has meaning only in special cases.

An aggregate model of output, inflation and interest rates for industrialised countries

Ein aggregiertes Modell fur Produktion, Inflation und ZinssAtze der IndustrielAnder. - In diesem Artikel wird ein okonometrisches Modell fur die IndustrielAnder insgesamt mit Hilfe von jAhrlichen Daten aus der Nachkriegszeit geschAtzt. Das Modell enthAlt Gleichungen fur Bruttoinlandsprodukt, Inflation, ZinssAtze und Guterpreise (au\er olpreisen). Bruttoinlandsprodukt und sein Deflator spiegeln die Entwicklung von Angebot und Nachfrage wider, wAhrend die Rohstoffpreise positiv mit der WirtschaftstAtigkeit und den realen olpreisen und negativ mit den Realzinsen variieren. Diese hAngen ab von dem Angebot an und der Nachfrage nach Anlagekapital auf dem Weltkapitalmarkt, den Vermogensumschichtungen sowie von der WirtschaftstAtigkeit.

EXCESS DEMAND, UNDERCAPITALIZATION, AND THE TRUE INTEREST RATE FOR CREDIT UNION LOANS IN UNORGANIZED MONEY MARKETS

MOST CREDIT UNIONS are patterned after the CUNA** model in which members pool their savings and in turn lend to fellow members at a nominal interest rate not to exceed 12 % per annum. Any residual over costs which results from lending operations may be distributed as dividends or interest rebates. No limit is placed on rebates, while a maximum of 6% is generally set on the dividend rate. In the organized money markets of the industrialized countries, the traditional interest ceilings are generally high enough, in relation to competing market rates, so that the dividend and loan rates can serve to equilibrate supply and demand for loanable funds. If idle funds begin to accumulate, the real interest rate on loans can be reduced below the nominal rate by granting interest rebates. By the same token, the dividend rate can be adjusted, within the legal limit, to attract or discourage additional loan capital. However, in unorganized money markets, where competing market interest rates have been estimated to average between 24% and 36%o per annum, [Wai ( 1957) ], the traditional interest constraints on credit union loans and dividends effectively destroy the market equilibrating function of the nominal interest rate. Under these conditions, demand for loanable funds tends perpetually to exceed supply. Two very important problems stem from this failure of the price mechanism; one is, of course, the loan allocation problem, and the other is the problem of raising initial loan capital. To meet these twin problems, credit unions in unorganized money markets have hit upon a simple device: a member's ability to borrow at the low nominal loan rate is made contingent upon his prior and continued saving in the credit union. This device has the dual advantage of encouraging members to save and of rationing scarce loan funds among competing loan applicants. In effect, it raises the real interest rate on loans above the nominal rate and thereby permits the price system to at least partially re-assume its allocative role. This effect can be illustrated graphically by use of a two-period paradigm of choice (see Diagram 1). The paradigm assumes a population of potential credit union members, each of whom possesses some endowment of both present and future goods. Potential member Fulano is one of this population. He currently holds, the combination of present and future goods represented

Credit Availability, Interest Rates, and Monetary Policy

One important strand of the new theory of monetary control (sometimes called the doctrine) is the argument that the effectiveness of monetary policy does not depend solely on changes in interest rates and the impact of rate changes on the demand for loanable funds. Changes in the availability of credit, it is alleged, can reinforce the effects of changes in the rate of interest. This theory has been criticized on the grounds that changes in availability, if they occur, are bound to be temporary and are therefore of no great consequence in stemming (or stimulating) the demand for loanable funds. A further possibility-one curiously neglected by the critics of the availability doctrine, although it appears to have been much in the minds of earlier writers on credit rationing-is that changes in credit availability might be in a direction to offset rather than to reinforce the effects of changes in interest rates.

The Rate of Interest and the Marginal Product of Capital

Previous articleNext article No AccessThe Rate of Interest and the Marginal Product of CapitalLloyd A. MetzlerLloyd A. Metzler Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Journal of Political Economy Volume 58, Number 4Aug., 1950 Article DOIhttps://doi.org/10.1086/256961 Views: 32Total views on this site Citations: 8Citations are reported from Crossref Copyright 1950 The University of Chicago PressPDF download Crossref reports the following articles citing this article:Carlo Milana Refuting Samuelson’s capitulation on the re-switching of techniques in the Cambridge capital controversy, The Review of Austrian Economics 46 (Aug 2022).https://doi.org/10.1007/s11138-022-00591-yRobert E. Kohn A capital budgeting model of the supply and demand for loanable funds, Journal of Macroeconomics 12, no.33 (Jun 1990): 427–436.https://doi.org/10.1016/0164-0704(90)90006-VJ. E. Woods Notes on capital theory: a comment on ‘the economic basis of interest rates’, Journal of the Institute of Actuaries 116, no.11 (Apr 2012): 109–126.https://doi.org/10.1017/S0020268100036477Donald J. Harris Profits, Productivity, and Thrift: The Neoclassical Theory of Capital and Distribution Revisited, Journal of Post Keynesian Economics 3, no.33 (Nov 2015): 359–382.https://doi.org/10.1080/01603477.1981.11489229Bo Sandelin Wicksell's Missing Equation, the Production Function, and the Wicksell Effect, History of Political Economy 12, no.11 (Mar 1980): 29–40.https://doi.org/10.1215/00182702-12-1-29 Ronald Findlay An "Austrian" Model of International Trade and Interest Rate Equalization, Journal of Political Economy 86, no.66 (Oct 2015): 989–1007.https://doi.org/10.1086/260725Bo Sandelin The Wicksell Effect, Dewey, and Others: A Note, History of Political Economy 7, no.11 (Mar 1975): 123–131.https://doi.org/10.1215/00182702-7-1-123C. E. Ferguson, Donald L. Hooks The Wicksell Effects in Wicksell and in Modern Capital Theory, History of Political Economy 3, no.22 (Jun 1971): 353–372.https://doi.org/10.1215/00182702-3-2-353

Thrift and Business

to depend quite largely upon its ability to secure an adequate supply of goods from wholesalers or jobbers and manufacturers respectively. The manufacturer in his turn is limited by his success in obtaining raw materials from an under-supplied market. If one is to judge by the usual indicia such as bank clearings, volume of trade, demand for loanable funds and for labor, we are enjoying a period of great prosperity in spite of the almost universal prediction to the effect that a period of depression would set in immediately after the cessation of hostilities. In spite of the fact that the most optimistic entrepreneurs expect the usual post-war decline in prices, this decline has not set in to any marked degree, in fact, the prices of many commodities have continued to rise. A heavy demand for every sort of commodity continues and, in some cases, unheard of prices are being asked and obtained. The high price level has compelled constant increases in wages, which seeming additions to his wellbeing have in many cases resulted in a falling off in the worker's efficiency as a producer and a greater liberality in his scale of expenditures. This latter has been considerably accentuated by. the feeling of letting down after the deprivations of the war period. After two years of restricted consumption, either voluntary or imposed by the government, the natural reaction is in the opposite direction. Notwithstanding the fact that the business outlook continues good, save for labor troubles in certain industries, a period of falling prices, contraction of credit and general economic readjustment is bound to come. It is the purpose of this discussion of thrift and business, therefore, to point out some tendencies which have been developing during this abnormal period and which should be eradicated from our economic life if they are not to prove a decided menace in the period which is likely to follow.