Federal Reserve Interest Rate Research Articles

US monetary policy and business cycles in developing countries

The article examines modeling the impact of news shocks of US monetary policy on developing countries. The study analyzes the transmission mechanism of the Federal Reserve's interest rate news shock. The authors argue that the volatility of macroeconomic indicators in emerging economies can be explained by changes in monetary policy in other countries, and highlight the main channels of influence: financial sector indicators and trade indicators. In this paper the authors first use the LSDV-estimator of the panel vector autoregression and identify unexpected and news shocks. To achieve this goal, quarterly data was collected from the first quarter of 1998 to the third quarter of 2017 for Russia, along with data starting from the first quarter of 1995 for several developing countries. The results obtained indicate that the expected tightening of US monetary policy leads to a decrease in output, investment, and weakening of exchange rate in Russia. The monetary news regarding an increase in the US Federal Reserve's interest rate in two quarters also results in a short-term increase in trade balance and interest rates. News about future economic developments affects macroeconomic indicators up to two quarters before the implementation of monetary policy changes. Additionally, the news shock accounts for up to 11% of the variation in macroeconomic indicators in Russia. Accordingly, the monetary policy news shock is found to be as significant as an unexpected shock. The paper concludes with the analysis of the role played by various financial and trade channels.

The Influencing Factors of RMB Exchange Rate in the Background of Anti-globalizationAn Empirical Evidence Based on VAR Model

Affected by the epidemic and geopolitics, global economic growth has slowed down, trade protectionism has begun to emerge, and anti-globalization sentiment has begun to sprout. With the pace of the Federal Reserve's interest rate hike, the global exchange rate, especially the RMB exchange rate, is gradually under pressure, which has a great impact on the economy and financial sector of the whole country. The research topic of this paper is the influencing factors of the RMB exchange rate in the background of anti-globalization, and the empirical analysis of the VAR model based on Stata software. The study found that rising domestic interest rates, a rising balance between import and export trade and rising uncertainty about US economic policy will lead to the appreciation of the RMB, while the growth of money supply will lead to the depreciation of RMB. It is worth noting that the RMB exchange rate is less affected by the uncertain economic policy factors in the United States, which shows that under the current anti-globalization and international game background, China still has a relatively independent control of the foreign exchange market.

A Commentary on the Silicon Valley Bank Debacle

SUMMARY KPMG issued its audit report for the parent company of Silicon Valley Bank (SVB), SVB Financial Group, on February 24, 2023, and the bank’s assets were taken over by Federal Deposit Insurance Corporation regulators on March 10. Although depositors began fleeing SVB in February, deposits declined by 13 percent during the preceding fiscal year. SVB invested substantially in long-term government bonds, whose value plummeted due to significant Federal Reserve interest rate increases, and the classification of the securities prevented their conversion to cash to meet depositor demands. Alongside explaining management and regulatory failings that led to SVB’s collapse, this paper formulates an argument of possible alternative actions the auditor could have pursued during the audit or upon release of its audit report. Due to inaction, KPMG may hinder its ability to defend against current litigation.

The Impact of the Latest Federal Reserve Interest Rate Hike on the Chinese Economy

This study utilizes weekly data from March 2022 to September 2023, employing the TVP-VAR model to empirically analyze the impact of the Federal Reserve's interest rate hikes on the Chinese economy. The results indicate that the Federal Reserve's rate hikes have exerted negative shocks on China's output, with the effects dissipating after 8 to 12 lags. China's monetary policy has shown a short-term inverse relationship with that of the United States, though the overall impact remains minimal. The rate hikes have suppressed China's fixed asset investments, with a gradually diminishing impact on GDP. Additionally, the rate hikes have negatively affected the RMB exchange rate and China's exports, with the rising USD/RMB exchange rate further restraining exports. The widening interest rate differential between the USD and RMB has impacted China's stock market, making international capital more inclined to invest in U.S. enterprises. To address these challenges, this paper recommends that China continue to implement a prudent monetary policy, advance RMB internationalization and exchange rate marketization reforms, enhance market liquidity, and improve the stock market and institutional frameworks to bolster economic stability and resilience. The findings provide theoretical foundations and feasible strategies for sustaining China's economic growth and mitigating external shocks.

The Impact of Geopolitical Conflict and Fed Rate Hikes on Asset Pricing

In the current context of weak economic recovery, ongoing Russia-Ukraine conflict, and consecutive interest rate hikes by the Federal Reserve, global financial and commodity markets have experienced intensified turbulence. To investigate the impact of the Russia-Ukraine conflict and the Federal Reserve interest rate hikes on asset pricing, this study first analyzed the U.S. stock market, bond market, and commodity market based on data from the CEIC database. From the comprehensive stock and year-on-year data after each round of interest rate hikes, it is evident that both the Russia-Ukraine conflict and the Federal Reserve interest rate hikes have had a significant negative impact on investors' financial assets. Additionally, due to the continuous interest rate hikes by the Federal Reserve, funds from the stock market have gradually shifted to the bond market. Furthermore, after analyzing the impact of the Russia-Ukraine conflict and the Federal Reserve interest rate hikes on the U.S. stock market, bond market, and commodity market, the study further explored the influence of these factors on asset pricing using the discounted cash flow (DCF) valuation model. Finally, the study provided an outlook on future market trends.

Research on RMB Depreciation and Its Impact on Chinese Corporate and Society

Raising interest rates by the Federal Reserve forces global capital flows to the US market, which in turn causes other countries economic growth to slow or currency to depreciate. China has been inevitably affected by the Feds higher interest rates, which have led to the devaluation of the RMB and have had a negative impact on the normal operation of Chinese corporations and society. Therefore, this paper analyzes the impact of RMB depreciation caused by the Federal Reserve interest rate hike on China through literature review and case analysis. Through research, the Federal Reserve adopted the policy of interest rate increases to force the Chinese government to tighten its internal monetary policy while continuing to promote the internationalization of the RMB, which in turn caused the depreciation of the RMB. Export-oriented enterprises can avoid interest rate risk caused by RMB depreciation through financial means, and the overall advantages outweigh the disadvantages. However, the depreciation of the RMB has increased the costs of cross-border e-commerce, Chinese tourists traveling overseas, and studying abroad, and the overall disadvantages outweigh the advantages.

Silicon Valley Bank Collapse: Causes & Consequences

This paper discusses the concept of bank bankruptcy and highlights the recent failure of Silicon Valley Bank (SVB) as a significant case similar to the Lehman Brothers' collapse in 2008. Lehman's failure was attributed to the U.S. housing market collapse and internal risk management issues. SVB's failure, occurring in 2023, resulted from both internal factors (improper decisions, high-risk strategies, and poor financial management) and external factors (economic recession, Federal Reserve interest rate hikes, regulatory challenges, and changes in the tech industry). The bankruptcy of SVB has far-reaching economic impacts on depositors, borrowers, entrepreneurs, investors, and the banking industry. It triggers a crisis of confidence, liquidity pressure, and systemic risks. The Federal Reserve implements emergency measures to address the fallout, reflecting on regulatory approaches to mitigate threats to the banking system. The comparison with Lehman Brothers underscores similarities in improper development strategies, asset structures, risk management, and regulatory oversight, leading to systemic risks and undermining financial market confidence.

Impact of the Federal Reserve Interest Rate Hikes on the U.S. Dollar Exchange Rate

Impact of the Federal Reserve Interest Rate Hikes on the U.S. Dollar Exchange Rate

Bank Risk Assessment under COVID-19 Crisis

The global economy is showing signs of gradual recovery after experiencing stagnation during the COVID-19 epidemic. However, one major concern in the United States is the persistently high inflation rates observed in recent years. To address this issue, the United States has initiated a continuous interest rate increase plan as a measure to slow down the country's economic growth. While this strategy aims to curb inflation, it has created a series of challenges, particularly for the banking industry. The repercussions of these interest rate hikes have extended to various sectors of the economy. Notably, the technology sector has felt the pinch as higher borrowing costs have dampened the momentum of technology stocks, resulting in a decline in valuations for technology companies. Silicon Valley Bank, a financial institution heavily reliant on the technology industry, has also experienced the adverse effects of these interest rate hikes. Perhaps one of the most contentious developments resulting from these actions was Credit Suisse allowing UBS to acquire it at a price significantly below its market capitalization—approximately a quarter of its market value. This move was driven by concerns about preventing systemic risks. In sum, the far-reaching and, in some cases, severe consequences of the Federal Reserve's interest rate hike strategy underscore the critical importance of striking a balance between economic growth and inflation control.

The Transmissive Effect of the Federal Reserve's Interest Rate Hike on China's Government Bond Yields in the Context of the COVID-19 Pandemic

The global economy underwent profound shifts due to the COVID-19 pandemic, bringing monetary policies of major economies, such as the U.S., to the forefront. As the U.S. Federal Reserve's decisions can resonate globally, understanding their ramifications on China's bond market post-COVID-19 becomes paramount. This research delves into the ripple effects of U.S. monetary policy on China's bond market dynamics. Utilizing a mixed methodology, the study incorporates both quantitative and qualitative analyses based on financial records and historical data. Preliminary findings highlight the U.S.'s aggressive monetary responses during the pandemic, and how China's bond market, with high yields, presents a competitive return. Additionally, China's swift economic recovery and robust export figures reinforce its financial resilience. The study further examines the transmission effect of the U.S. Federal Reserve's interest rate policies on China's government bond yields. Ultimately, the research aims to offer comprehensive insights to navigate future economic landscapes in light of global challenges and monetary policies.

Research on Gold Price Changes and Factors Under the Background of Fed Interest Rate Hike

With the change of international form, the gold market is changing rapidly. In 2021, the U.S. stagflation was serious, so in 2022, the Federal Reserve adopted a series of interest rate hikes, coupled with the impact of the conflict between Russia and Ukraine. As a safe haven product, the price of gold fluctuated greatly in the short term. As an important commodity, gold is crucial to judge its price change trend. This paper mainly analyzes the U.S. monetary policy from 2022 to 2023. By studying the reasons and background of the promulgation of monetary policy, it judges the causes of the Federal Reserve's interest rate increase, and judges the background of joint inflation and regional conflict according to the international form in 2022. Combined with the change trend of gold price, it makes a joint analysis, and gets the impact trend of the Federal Reserve's interest rate increase on gold price from 2022 to 2023. Finally, it comes to the conclusion that the increase of interest rate will lead to the decline of gold price. In the early stage of interest rate increase and a large number of interest rate increases, the gold price is more affected by the increase of interest rate, so it is suitable to short gold at this time, while in the late stage of interest rate increase and the slowdown of interest rate increase policy, the gold price is more affected by other factors, so it is suitable to long gold at this time.

The Federal Reserve's Interest Rate Increases and Their Effect on the U.S. and Global Economies under the Covid-19 Pandemic

This paper delves into the successive Fed rate hikes that began in March 2022 and their far-reaching impact on the domestic and global economy. The paper primarily examines the reasons behind these rate hikes, focusing on their response to the problems caused by the COVID-19 pandemic, particularly unemployment and inflation trends. The pandemic triggered widespread lockdowns, leading to severe supply chain disruptions and economic downturns. During this period, unemployment rates rose sharply and reached historic levels. Central banks worldwide had adopted loose monetary policies to stabilize economies in the short term. However, this also raised the risk of persistent inflation. Fiscal stimulus, intermittent interest rate cuts, and a raft of bailouts, such as the CARES Act, have added complexity to the economic landscape, affecting various sectors and necessitating higher interest rates to restore pre-pandemic stability. Disruptions in global supply chains played a key role in stoking inflationary pressures, eroding consumer purchasing powers, and highlighting the urgency for the US Federal Reserve to intervene by adjusting interest rates. Assessing the impact of these rate hikes on stocks shows a resilient market that remained optimistic about the U.S. economic recovery. In addition, the study outlines the impact of these rate hikes on foreign exchange markets, international capital flows, emerging markets, trade dynamics, and global competitiveness.

An Assessment of the Spillover Effects of Fed Rate Hikes on Chinese Economy

Facing the pressure of high CPI, the interest rate hike process has initiated by the Federal Reserve (Fed) in the context of the global economic downturn in 2022. This adjustment in the Federal Reserve's monetary policy has a significant influence on the global economy, including China. This article focuses on the spillover effect of the Federal Reserve's interest rate hike policy on Chinese economic development. It will first review the historical background and impact of the four interest rate hikes cycles in the Unite States since 1994. And then the analysis of the impact is presented in three different transmission channels: interest rate channel, exchange rate channel, and capital flow channel. After that the policy suggestions on how to deal with the spillover effect is provided. Lastly, this article concludes that even though the spillover effect of interest hike policy continues to put downward pressure on Chinese economy, it is shrinking with China becoming more independent in implementing its monetary policy.

The Impact of Federal Reserve Interest Rate Hike on the Entertainment Industry: An Empirical Evidence

The purpose of this paper is to investigate the impact of Federal Reserve interest rate hikes on the entertainment industry, with a focus on the American film company Disney. The study utilizes a VAR model for impulse response analysis and an ARMA-GARCH model for assessing stock returns and conditional variances. The findings indicate that a rise in the USD index leads to a decrease in Disney's earnings from foreign markets, and a Fed rate hike could have a negative impact on its profitability. However, higher interest rates can encourage funds to flow into the stock market and increase the demand for stocks, leading to a rise in stock prices. Negative effect dominates at the beginning, followed by positive effect, and then changes back to negative effect, gradually net effect tends to 0 over time. The paper suggests that investors diversify their portfolio, and that enterprises develop targeted risk management and seek policy support. The study provides insights into the multifaceted effects of a Fed rate hike on the entertainment industry, and contributes to the existing literature on exchange rate risk and capital structure in multinational corporations.

The Impact of the Federal Reserve's Interest Rate Hike on the Chinese Economy

The Impact of the Federal Reserve's Interest Rate Hike on the Chinese Economy

Inflation, Monetary Policy, and Economic Impact: Taking the Federal Reserve's Interest Rate Hike as an Example

The Federal Reserves interest rate hike is one of the key topics of the current research. Due to the status of the dollar in the global economy, the Federal Reserve's interest rate hike has a profound impact. Therefore, this article collected and analyzed the data of interest rate increases of the Federal Reserve in the past five years. This article discusses the reasons for inflation, as well as the impact of the Federal Reserve's interest rate hike on the foreign exchange market. This paper found that the Federal Reserves interest rate hike has almost no effect on curbing inflation. As the Federal Reserves keeps raising interest rates, less trust in the world leads to a weaker dollar and slower economic growth. With regard to the Federal Reserve continues to raise interest rates, China should take precautionary measures on the premise of ensuring its own economic development and stability. For investors should be timely attention to the Federal Reserve rate hike frequency and response.

The Impact of the Federal Reserve's Interest Rate Hike on Gold Futures Prices: The Dynamic Trend

This article aims to study how the increase in the Federal Reserve’s Interest Rate is going to impact the gold futures prices under a global economic recession period. Through collecting historical gold prices in chronological order from 2010, the data are then adapted into ARIMA model. It is to investigate the predicted correlation between the macro indicators and performance of the financial derivatives. The result includes that the policy change will have more dominant effects in the long run than short run. The real-world analysis should also incorporate multiple factors that range from qualitative to quantitative to facilitate a more precise prediction of future derivative’s price. The significance of the study is to suggest the time value of policy. Investors who hope to yield long-term return, should pick historical data, and learn the resultant change that happen only a few months after the policy announcement. The authorities should also take note of the intensity of the policy change, trying their best to achieve its economic goal at once, which would avoid rippling vicious effect and panic among the public.

What a Federal Reserve Hikes Interest Rates Effect Bond Price and the Enlightenment to Investors

In recent years, the Federal Reserve's series of interest rate hikes have wielded a profound influence over the intricate workings of financial markets. This article offers a succinct yet comprehensive analysis, beginning with a succinct summary of the repercussions of the increase in the Federal Reserve's interest rates affects both stock market liquidity and the bond market. This paper constructs a ARIMA model to estimate the data which not effected by Federal reserve interest rate hikes. The constructed ARIMA model not only elucidates the direct impact of these monetary policy adjustments on bond prices but also encapsulates the temporal dynamics at play. Through a meticulous examination of various time intervals, the model captures the distinct nuances of monetary policy's influence, reflecting its inherent lag and the intricate interplay with market responses. They extend to investors and policymakers, offering a practical guide for optimizing investment portfolios and shaping effective monetary strategies. As investors navigate the ever-fluctuating financial landscape, a nuanced understanding of the temporal dynamics can aid in crafting informed investment decisions. Policymakers, too, stand to benefit from these insights, as they can harness the model's revelations to formulate timely and precise monetary policies that align with the intricate pulse of the market.

The Impact of the Fed's Interest Rate Adjustment Cycle on the Price of WTI Crude Oil Futures

This article is based on monthly data from January 2016 to January 2022, including the US Federal Funds Rate and WTI crude oil futures price index. A TVP-VAR model is constructed to study the impact of the Federal Reserve's interest rate cycles on WTI crude oil futures prices. The research found a positive correlation between crude oil futures prices and the Federal Reserve's interest rate cycles. That means that when the Federal Reserve raises or lowers the US Federal Funds Rate, it leads to an increase or decrease in crude oil futures prices. Therefore, it is believed that in the current context of global quantitative easing and the sustained rise in international crude oil prices, China should formulate a new energy strategy that matches the high-quality development of the social economy and accelerate the transformation and upgrading of the crude oil industry.

The impact of Federal Reserve Interest Rate Hikes on the Systemic Risk of the U.S. Banking Industry: Based on Semi-Parametric Vine Copula SCCA Model

We use the Vine Copula SCCA model to measure the systemic risk of the US banking industry, and compares the impact of two different events, external risk and Fed rate hike on systemic risk. The results demonstrate that the systemic risk of the US banking industry reached its peak when affected by external shocks (2020) but was quickly released by market rescue measures. When the Fed raised interest rates consecutively in 2022, large banks showed good resistance to risk, but the joint default risk of small and medium-sized banks remained at a significant level for a long time, indicating that interest rate hikes may have increased the systemic risk of the US banking industry. US banking industry should maintain good risk management and prudent operation, and the regulatory intensity they receive also needs to be strengthened.