Interest Rate Factors Research Articles

Financing Advantage of Green Corporate Asset-Backed Securities and its Impact Factors: Evidence in China

As an innovative green financial tool, green corporate asset-backed securities can effectively solve the problems of narrow financing channels and maturity mismatches for green projects, which can help achieve green and low-carbon development, carbon peaking, and carbon neutrality goals. In this paper, we examine the financing cost advantages of green corporate asset-backed securities and the related impact factors through a combination of empirical and case studies. Empirical research based on the propensity score matching method (PSM) shows that China’s green corporate asset-backed securities issuance rates are 36.97°bps lower than traditional corporate asset-backed securities on average. Credit rating, issuance scale, issuance interest rate, issuance period, and green factors have become the main impact factors of green corporate asset-backed securities financing advantages.

Market Premium and Macroeconomic Factors as Determinants of Industry Premium: Evidence from Emerging Economies

In this study, we examine the equity (industry) premium of seventeen nonfinancial sectors covering sample 306 firms using monthly data from January 2002 to December 2018. Two-stage least square (2SLS) method is applied to estimate the macro-based multifactor model. It is found that the market premium and the interest rate factors are significantly affecting the industry equity premium of all the nonfinancial sectors. However, there exists a positive effect of other macroeconomic variables such as money supply, foreign direct investment, and industrial production which is different for the different sectors based on its nature of product and services they offered. The industries based on their product development which are linked to particular macroeconomic variables have more effect than others such as increase in money supply which cannot increase the sale of pharmaceutical products until needed. Similarly, an interesting insight reveals that industries producing seasonal goods, e.g., food producing, are not very much affected by macroeconomic variables but the change in seasons and similar results also revealed for tobacco industry.

Can interest rate factors explain exchange rate fluctuations?

The level, slope, and curvature of the yield curve reflect time variation in investors’ risk premia and are known predictors of excess bond returns and economic activity. In this paper, I develop a term structure model under complete markets and no arbitrage to relate these interest rate factors to exchange rate fluctuations. The Gaussian properties of the stochastic discount factors imply non-linearities in exchange rate risk premia that are shown to account for up to half of the in-sample variation in one-year currency returns for different country pairs during the 1980s–2015 period. I find that interest rate factors help explain exchange rate fluctuations in and out of sample, particularly at longer horizons, and yield profitable currency portfolios relative to standard carry trade strategies.

Can Interest Rate Factors Explain Exchange Rate Fluctuations?

This paper explores whether interest rate factors, derived from the yield curve, can explain exchange rate fluctuations at different horizons. Using a dynamic term structure model under no-arbitrage, exchange rates are modeled as the ratio of two countries’ stochastic discount factors. Key to this framework is that factors are observable, which allows the model to be estimated by Maximum Likelihood. Results show that interest rate factors can explain half of the variation in one-year exchange rates and up to ninety percent of five-year movements, for free-floating currencies from 1999 to 2014. These findings suggest that yield curves contain important information for modeling exchange rate dynamics, particularly at longer horizons. JEL codes: G15, F31, E43 * Julieta Yung, Federal Reserve Bank of Dallas, Research Department, 2200 N. Pearl Street, Dallas, TX 75201. 214 922-5443. julieta.yung@dal.frb.org. I am grateful to Tom Cosimano, Jun Ma, Mark Wohar, and many others for helpful comments and suggestions. This paper also benefited from comments made by the participants at the Macroeconomics Seminar and the Mathematical Finance Research Group at the University of Notre Dame. The views in this paper are those of the author and do not necessarily reflect the views of the Federal Reserve Bank of Dallas or the Federal Reserve System.

Optimization of Packaging Process Parameters Using Combined Taguchi Method-present Worth Method/Inflationary Factor Validated

In a previous article, the packaging optimization literature illustrated how to optimize the packaging parameters using the classical Taguchi approach. Notwithstanding, it is compelling to bridge the gap created in the article for further advancement. Thus, this paper contributes to expanding scholarship regarding the area. The paper targets the Taguchi methodical optimization literature in which several scores of research across engineering disciplines and beyond have been undertaken. At present, evaluation using the Taguchi method often stops at the determination of the optimal settings from the response table through a chain of steps from factor-level selection, orthogonal array choice, signal-to-noise determination, and response table evaluation to emerge the optimal parameters. There is no information on the economic aspects of the parameters, yet processes are expected to be sustainable while economic factors play a central role. A novel idea of the present work is introduced where the interest rate and inflationary factor with levels are used to determine the economic strength of each parameter through ranking. Data was collected from a brewery process, and literature data concerning cold arc welding parametric evaluation was used. The outcome demonstrates the workability of the method in the packaging plant and cold arc welding process. The work is useful for packaging managers and welding engineers for planning purposes.

Dampak Faktor Eksternal dan Faktor Internal terhadap Perkembangan Bank Umum Syariah di Indonesia

The goal of this study was to determine the impact to which external factors such as GDP growth, inflation and BI interest rate and internal factors such as CAR, FDR and NPF have had an influence on the development of Islamic Banks in Indonesia that represented by the growth of total assets Islamic banks in Indonesia from 2015-2019. This research used a quantitative approach and the data would be analyzed using multiple regression test through panel data regression with partial test and simultaneous test provided by Eviews 10. Considering the results of the simultaneous testing, the study suggests that all variables had an impact on the development of the Islamic Bank. As for the partial test, from the external factors only the BI rate which gives a significant negative impact on the development of Islamic banks and from internal factors there are NPF and FDR which give significant negative impact. It was concluded that GDP, Inflation, and CAR did not affect the development of Islamic Banks in Indonesia.

The interest rate factor in commodity markets

This paper proposes a joint affine term structure model for multiple commodity future contracts. We use latent variables as factors to find one common to the oil, corn, copper and gold markets. This common factor behaves like an interest rate, influencing futures prices through the cost of carry, and is consistent with the theory of storage. It approximates, but nevertheless significantly differs from, the US federal funds rate. Introducing it into a model that includes the federal funds rate significantly improves the fit of the joint affine commodity term structure model.

Effect of Macroeconomic Factors on The Small-Medium Enterprises Loans

Small-medium enterprises (SMEs) are the main pillar of the Indonesian economy. Based on 2016’s Economic Census, most businesses in Indonesia are SMEs, while SMEs absorb the majority of the workforce. The empowerment of SMEs is one way to improve the economy. To empower the SMEs sector, the Indonesian government launched the Kredit Usaha Rakyat (KUR) since 2007. The lasts policy is the provision of the mild interest rate for KUR since 2016. The hope is that with a mild interest rate, SMEs can get affordable financing access so they can be the driving force of the economy. However, credit demand is not only influenced by interest rate but other macroeconomic factors such as Gross Domestic Product and inflation. Also, this study will look at how development disparities between the West Indonesia Region and East Indonesia Region affect credit demand. This research is intended to see the effect of macroeconomic factors on Small-medium enterprises loans. Source of data is taken from Indonesia Badan Pusat Statistik. Panel data use 2011-2018 time-series data and 33 provinces cross-section data are used to investigate the relationship of SMEs’ Loans with these macroeconomic factors. The result show that Interest Rate, GRDP, and Inflation, effect on SMEs Loans in a respectively different manner. However, the development disparities between West Indonesia Region and East Indonesia Region has no significant effect on SMEs’ loans. The study concludes that macroeconomic activities are important indicators not only the interest rate. So, the government should not only focus on interest rate policy but also other macroeconomic factors. Keyword: Macroeconomic Factors, SMEs’ Loan, Kredit Usaha Rakyat (KUR), Panel Data

Can country-specific interest rate factors explain the forward premium anomaly?

The forward premium anomaly refers to the fact that changes in spot exchange rates are negatively related to interest rate differentials between home and foreign countries, which is contrary to the predictions of the uncovered interest rate parity (UIRP). We propose a regression model of the interest rate differentials across countries (known as carry trade) adjusted for a time-varying exchange rate risk premium which can explain the anomaly and provide forecasts of exchange rate changes in accordance to the theory. The proposed model is based on estimates of the exchange rate risk premium implied by a simple and empirically attractive two-country affine term structure model with global and local factors. We also show that the forecasting power of the model compares favorably to the random walk model of exchange rates, considered as benchmark in the literature.

Взаємозв’язок фінансової відкритості та економічного зростання

The article summarizes current approaches to the theoretical substantiation of the effects of financial openness on emerging economies. The empirical data on the verifying financial openness effects, in particular the promotion of capital inflows into emerging economies and their productive development in the context of globalization processes, are analyzed. An attempt has been made to identify the influence of the interest rate factor on the direction of the redistribution of international capital flows. Generalized the patterns of the distribution of capital movement instruments depending on the level of development of financial institutions and signs of the capital flows' strong deformation impact on financial markets with underdeveloped institutional environment. As a result of the analysis, it was found that under the conditions of the new normality, characterized by an increase in the volume of free movement of volatile capital flows, an increase in the level of financial openness, contrary to theoretical provisions, does not directly cause the inflow of foreign capital. At the same time, attracting foreign capital on a free, unregulated basis has a limited impact on economic development and mainly finances only the existing, well-functioning, high-yield markets and industries. Contemporary realities and the approach to the evaluation of foreign direct investment as the most effective and less volatile instruments of attracting foreign capital do not correspond to the current state of things. In today's context, only a small part of the FDI arrive into the real sector, while the bulk of them are localized in high-yield segments of the financial markets and used for tax evasion. The lack of direct dependence of international capital flows on the spread of capital yields and the level of financial openness leads to the conclusion that, in addition to the classical factors, the drivers of foreign capital inflow include positive economic dynamics of the recipient country and presence of high-yield markets. At the same time, signs of sustainable economic growth or recession by themselves encourage capital inflow or outflow from the country. At the same time, the presence of a developed financial sector reduces the risks of instability and increases the investment component of financial openness. These conditions form an inverse relationship between macroeconomic dynamics, the level of development of the institutional environment and the change in the level of real financial openness of the economy.

Generalized Componentwise Splitting Scheme For Option Pricing Under The Heston-Cox-Ingersoll-Ross Model

In this paper, we consider a numerical pricing of European call and put options under the Heston-Cox-Ingersoll-Ross (HCIR) model. Based on this model, the prices of options are derived by solving a three-dimensional partial differential equation. We generalize a componentwise splitting scheme for solving this equation. The idea of this scheme is to decompose the discretized HCIR partial differential equation into six one-dimensional equations in six fractional time steps. These equations are represented in tridiagonal systems, which are solved by the Thomas algorithm. Moreover, the numerical experiments show that the European option prices are affected by changes in volatility, interest rate, strike price, and correlation factors. Furthermore, numerical experiments compare the calculated prices based on our scheme with the prices reported in the literature.

Macroeconomy and Company’s Policy on Firm Value: An Interactive Effect on Manufacturing Companies Listed in Idx Period 2013-2017

The purpose of this study to answer some questions on the factors impact on firm value in Indonesia Stock Exchange. This study, in specific, aims to test the gradual effect of macroeconomy and policy of the company on firm value. The concept used in measuring the fundamental macroeconomic factors of interest rates and exchange rates is the concept of the sensitivity of the interest rate and exchange rate factors of each company. While the concept used to measure company policy is capital expenditure and to measure company value is Tobins'q. This study used the samples of the manufacture industries from period 2013-2017, which the stock actively traded in Indonesia Stock Exchange (BEI). The sampling was purposive, and the analytical technique was SEM-PLS. The research outcome that the interest rate has a significant positive effect on firm value; the exchange rate has a significant negative effect on firm value, and the capital expenditure has a significant negative effect on firm value.

The economic performance of industrial and commercial rooftop photovoltaic in China

Due to its characteristics of nearby power generation, grid-connection, conversion and use, rooftop photovoltaic power generation has formed the advantages of less investment, flexible, efficient and environmental protection, with broad prospects for development. Therefore, studying its economic performance is of great significance to investment decision and policy improvement. Under the current technical cost and policy conditions of rooftop photovoltaic in China, this paper constructs a cost-benefit analysis model considering the impact of inflation on cash flow. The results show that: For small rooftop photovoltaic in China, first of all, under the existing subsidy price and cost, its investment payback period is short and the risk is low. Secondly, the average internal rate of return is more than 10%, and the levelized cost of electricity is 0.2727–0.5573CNY/kWh, so the economic performance is good. Then, although the subsidy price has been lowered twice in a row in 2018, its economic performance is still relatively good. Finally, in the economic performance analysis of rooftop photovoltaic, besides the influence of power generation capacity, loan interest rate, construction cost and other factors, the time value of capital and inflation are also factors that cannot be ignored.

The Synergy of Financial Volatility between China and the United States and the Risk Conduction Paths

Based on monthly data of six major financial variables from January 1996 to December 2018, this paper employs a structural vector autoregressive model to synthesize financial conditions indices in China and the United States, investigates fluctuation characteristics and the synergy of financial volatility using a Markov regime switching model, and further analyzes the transmission paths of the financial risk by using threshold regression. The results show that there is an approximately three-year cycle in the financial fluctuations of both China and the United States, and such fluctuations have a distinct asymmetry. Two thresholds were applied (i.e., 0.361 and 0.583), taking the synergy index (SI) as the threshold variable. The impact of the trade factor is significant across all thresholds and is the basis of financial linkages. When the SI is less than 0.361, the exchange rate factor is the main cause of the financial cycle comovement change. As the financial volatility synergy increases, the asset factor and interest rate factor start to become the primary causes. When the level of synergy breaks through 0.583, the capital factor based on stock prices and house price is still the main path of financial market linkage and risk transmission, but the linkage of monetary policy shows a restraining effect on synergy. Therefore, it is necessary to monitor the financial cycle and pay attention to the coordination between countries in terms of policy regulation.

The role of bank funding in systematic risk transmission

The transmission of risk among financial institutions is not limited to systematic risk and interest rate factors, but is also affected by the interconnectedness of institutions through balance sheet exposures. It is recognized that univariate specifications have severe limitations in explaining banks observed performance and measurement of risk, and may obscure possible unintended effects of bank capital regulation. Consequently, we link systematic risk to balance sheet factors and allow for dependencies in the covariance structure. We find that funding structure and balance sheet factors asymmetrically affect observed systematic risk in the largest Australian banks.

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Analysis of Chinese Short-Term International Capital Flow Capital Motivation

Based on the existing basis, this paper analyzes the short-term international working capital. In addition to considering the interest rate, exchange rate and asset price factors, it also incorporates the fluctuation risk factors of GDP for comprehensive consideration. This article uses the quarterly data of 2000Q1-2016Q3 to build a VAR model of quarterly data. The results show that Chinese short-term international capital flows are explained by their own changes to a large extent; among the four factors, exchange rate and asset price factors have the greatest impact, and arbitrage and DGP risk fluctuations have the weakest impact, indicating that investors are at the national level. Economic fluctuations and spreads are not sensitive, and the purpose of short-term international capital is to obtain the benefits of assets and exchange rates.

ANALISIS FAKTOR-FAKTOR YANG MEMPENGARUHI PERHITUNGAN PPH BADAN PADA PERUSAHAAN PEMBIAYAAN DI PT. HASJRAT MULTIFINANCE MANADO

One of the largest sources of state revenue in the tax sector is bandan income tax / PPh 29. This study aims to determine what factors influence the calculation of corporate income tax on finance companies at PT. Hasjrat Multifinance Manado. This research uses descriptive method which is used to find out how many factors influence the calculation of corporate income tax.From the results of the study it is known that there are several factors that influence the calculation of corporate income tax, namely the factor of sales contribution on credit by the dealer, the interest rate factor and the administrative revenue factor. The results of this study indicate that these factors are the main source of income for finance companies, thus affecting the calculation of Corporate Income Tax. The greater the contribution of the dealer will affect the value of financing, and the value of financing will affect the value of revenue and revenue of the company so that automatically the greater the contribution of corporate income tax/PPh 29. Keywords :Financing contributions, installments and interest income, taxes

An empirical analysis of bank specific factors affecting interest rate of Ugandan banking financial institutions

PurposeThe purpose of this paper is to investigate the effect of bank specific factors on interest rate in banking financial institutions (BFIs) of Uganda.Design/methodology/approachTo analyze the effect, an OLS random effects regression estimate on a data set of 24 banks from 2008 to 2016 from Bank of Uganda Depository Corporation survey was carried out. Studied bank specific factors including liquidity, operational efficiency, credit risk, capitalization and lending ratio are considered.FindingsThe results indicate that liquidity, operational efficiency, capitalization and lending out ratio affect the interest rate while credit risk does not.Research limitations/implicationsThe study has confirmed that bank specific factors influence interest rate and other factors such as industry-level and indirect macroeconomic indicators need to be explored. The differences in categories of banks on interest rate would be of importance. Finally, this study concentrated on banks in Uganda, future study would focus on the comparison of Ugandan banks with those of other countries in the East African Region.Practical implicationsBank managers should invest in up-to-date technology to reduce operational costs and improve efficiency. Managers of bank should take interest on equity mobilization, because it constitutes a cheaper source of capital to finance asset used in operations and long-term needs of borrowers financing. Government should consider a legislation that provides incentives toward savings and reduction in tax for bank inputs.Originality/valueThis is the first study that investigates the effect of bank specific factors on interest rate in Uganda’s BFIs.

Does Shariah compliance make interest rate sensitivity of Islamic equities lower? An industry level analysis under different market states

ABSTRACTThis paper examines the sensitivity of the Dow Jones Islamic market index and its corresponding industry equity indices to changes in the level, slope and curvature of the U.S. term structure of interest rates over the period 1996–2015 using the quantile regression approach. The empirical results reveal that the Islamic stock market has a considerable negative exposure to interest rate risk, although a declining time pattern of interest rate sensitivity is observed. The unexpected changes in the level factor of the U.S. yield curve, closely linked to long-term interest rates, are identified as the most important interest rate factor in explaining the variability of Islamic equity returns. Furthermore, the interest rate exposure tends to be stronger during extreme bearish conditions in the stock market, possibly due to the greater pessimism and risk aversion under these market circumstances. It is also shown that Islamic equities are not different from their mainstream counterparts in terms of interest rate sensitivity, indicating that the Islamic stock market does not provide a cushion against interest rate risk.