Stable Interest Rates Research Articles

PENGARUH INFLASI DAN TINGKAT SUKU BUNGA TERHADAP PEMBIAYAAN PADA BANK SYARIAH DI KOTA BANJARMASIN

Purpose: This study aims to determine the effect of inflation and interest rates on financing at Islamic banks in Banjarmasin city. Design/methodology/approach: This research uses quantitative methods. The data used is secondary data and time series. Data sourced from the pages of Bank Indonesia, the Financial Services Authority (OJK), the Central Statistics Agency (BPS) and data from Islamic Commercial Banks which are the objects of this study in the period 2014 to 2023. Findings: Based on the results of statistical data processing, the results of this study indicate that the value of Sig. Inflation variable (X1), amounting to 0.993> 0.05 and the tcount value of 0.009 < 2.571. Sig value. Interest Rate Variable (X2) is 0.066> 0.05 and the tcount value is -2.571 < 2.571. The results of this study indicate that simultaneously the inflation and interest rate variables affect financing at Islamic banks in Banjarmasin City. This can be proven by the value of Fcount 2.825 > Ftable 4.45. Research implications: Based on the research results, it is known that although inflation and interest rates have no effect on financing in Islamic banks, the government must remain effective in controlling macroeconomic activities to maintain the stability of inflation and interest rates, so that economic stability can be guaranteed.

An Investigation into the Impact of Interest Rate Fluctuations by Financial Lending Institutions on Small and Medium Enterprises’ (SMEs’) Loan Repayment among Selected Lusaka-Based Firms

This study purposed to investigate the impact of interest rate fluctuations by financial lending institutions on small medium enterprises’ (SMEs’) loan repayment Among selected Lusaka based SMEs. The issue of high interest rates charged by financial institutions is a significant concern for SMEs in Zambia. The study was guided by three research objectives; to examine the challenges SMEs face in repaying financial credit gotten from financial lending institutions; to find out the effect of interest rate fluctuations on loan repayment among SMEs operating in Lusaka City and to propose a policy framework amenable for stable and affordable interest rate by financial lending institutions operating in Lusaka City. The target population for this research was one hundred (100) SMEs registered and operating in Chilenje market in Lusaka city. This study employed a descriptive design and a mixed-method approach, combining qualitative and quantitative data collection to leverage the strengths of both methodologies. The research population was well-defined and complete for simple random and purposive sampling methods. The research paradigm was rooted in pragmatism, focusing on empirical data to explore the relationship between interest rate fluctuations and SME loan repayment behavior in Lusaka, using a sample size of 53 SMEs from Chilenje market. Data collection involved administering questionnaires with both open and closed-ended questions and interview schedules. This research study successfully established the effect of interest rate fluctuations on loan acquisitions among SMEs operating in Lusaka city. It demonstrated that SMEs are sensitive to changes in interest rates, with the majority indicating that their decision on loan acquisitions is affected by fluctuating interest rates. This underscores the importance of interest rate stability for SMEs in making informed borrowing decisions and managing financial risks. The study advocates for a framework which promotes transparency and market efficiency, implementing regulatory measures to mitigate risk and encourage competition, and facilitating access to credit information and alternative financing options. By comparing these findings with existing research, the study underscores the complex nature of SME loan repayment behaviors in response to interest rate fluctuations and emphasizes the need for collaborative efforts among policymakers, financial institutions, and SME stakeholders to address challenges and promote sustainable growth within the SME sector.

The Moderating Role of Government Effectiveness on the Relationship between Selected Macroeconomic Variables and Horticultural Export Performance in Kenya

The horticultural sector in Kenya plays a crucial role in driving the country’s economy, making up approximately 1.6% of the country’s GDP in 2019. Despite generating a significant Ksh152.3 billion in 2022, the value of these exports exhibited a decline compared to Ksh157.7 billion in 2021. These decreases in horticultural exports performance warrant further investigation into the underlying factors impacting this important sector. This study examines the role of government effectiveness in the relationship between different macroeconomic factors and Kenya’s horticultural exports performance using time series data from 1990 to 2021. The study’s key findings highlight the significant influence of government effectiveness on the relationship between exchange rates, inflation rates, interest rates, and horticultural export performance. This implies that well-designed government policies have the potential to enhance the positive impacts of these macroeconomic factors. The findings highlight the crucial role of government effectiveness in shaping the impact of macroeconomic factors on Kenya’s horticultural export performance. Considering these findings, the study provides a few policy recommendations. Investments in strengthening government institutions and policies can amplify the benefits of favourable exchange rates, controlled inflation, and stable interest rates on horticultural exports. Additionally, taking steps to enhance market access, decrease trade barriers, and negotiate more favourable trade agreements can amplify the advantages of favourable terms of trade for horticultural exports. Lastly, it is important to consider policies that can help address the negative effects of unfavourable terms of trade. This includes strategies like export diversification and risk management, which can be particularly effective with strong government backing.

Interest Rate Volatility and Economic Growth in Nigeria: New Insight from the Quantile Autoregressive Distributed Lag (QARDL) Model

AbstractThis is a study on interest rate volatility, a crucial form of volatility which affects local and foreign investments in the real and financial sectors. Whether to prioritize interest rate stability to prevent distortions in the market mechanism or to prioritize other macroeconomic objectives while allowing interest rates to independently react to market forces is a key question for Nigeria’s apex monetary authority. Answering this question is the primary motivation for this research. This paper is an attempt to establish the effect of interest rate volatility on economic growth and further conclude on the suitability of the financial liberalization policy in Nigeria. To reach an evidence-based conclusion, the paper analyzes the relationship between interest rate volatility and economic growth in Nigeria for the period 1981–2020. The QARDL procedure was employed to establish the short-run and long-run quantile-specific impacts of interest rate volatility. As a final step, Granger causality tests are conducted to investigate the predictive powers of the variables. It is discovered from the econometric analysis that interest rate volatility adversely affects the economic performance of Nigeria in both the short run and long run. Consequently, full liberalization is not suitable for the economy. Moreover, we find that the short-run adverse growth effect of interest rate volatility is greater when the economy is already in a relatively weak state, whereas the long-run adverse growth effect is greater when the economy is already in a relatively strong position. The findings sufficiently prove that full interest rate liberalization is not Pareto efficient for Nigeria. Hence, greater supervision of the interest rate corridor system to reduce volatility in the rates and minimize chances of persistent upward or downward bias is advised. Study limitations and directions for further research are also provided.

Analysis of Macroeconomi Factor Effect on the Stock Price Index in Jakarta Islamic Index

The country’s economy slowdown causes the affected exchange rate or exchange rate to weaken, and Bank Indonesia’s interest rate policy at the time of the economic downturn decreases, it has an impact on the stock index in the JII. This research aims to determine the influence of macroeconomics on the IHS in JII. The method used is quantitative research, with an analysis model using the VAR technique. The data used is secondary data of a time series. The research results show that the influence of the ISSI and BI rate responded positively, while inflation responded positively. The exchange rate variable responded negatively to JII shocks until the end of the period. The results of the FEVD test show that the largest contribution was JII, inflation, ISSI, and BI rate, and the smallest contribution to JII was the exchange rate. Implication and recommendation this research are Bank Indonesia as the institution responsible for controlling inflation, can maintain inflation stability, lower the exchange rate against the dollar and maintain interest rate stability.

Dynamic Stability of Public Debt: Evidence from the Eurozone Countries

This paper investigates the dynamic stability of public debt and its solvency condition in the face of crisis periods (1980–2021) in a sample of 11 euro-area countries. The focus is on the feedback loop between the dynamic stability of public debt and interest rates, discounted by economic growth, in conjunction with budget deficits during tranquil and turbulent periods. Using the GMM panel dynamic model, the results show that dynamic stability was the case before the global financial crisis (GFC), while from GFC to the pandemic, dynamic instability prevailed and persisted in the evolution of public debt. Furthermore, panel threshold estimates show that dynamic instability of debt starts to violate the solvency condition when the borrowing cost is above 3.29%, becomes even stronger when it is above 4.39%, and exerts even more pressure when the level of debt is greater than 91%. However, the debt sustainability condition reverses course when economic growth is higher than 3.4%. The main policy implication drawn from the results is that low interest rates can create a self-reinforcing loop of high debt, which itself is a serious matter for public authorities when designing economic policies.

Interest Rate and Volatility of Share Prices of Firms Listed at the Nairobi Securities Exchange, Kenya

Purpose: The study sought to establish the effect of interest rate on volatility of share prices of companies listed at the NSE. The study was anchored the loanable funds theory.
 Methodology: The study employed a descriptive research design. The population of the study was the 20 companies listed at the NSE that forms the NSE share index as of December 2022. The study applied census where all the accessible population of all the 20 NSE share index was used. Data was gathered from secondary sources by the aid of a secondary data collection sheet. Data was obtained from financial and statistical reports released by the CBK. Data was analyzed using descriptive and inferential statistics. The descriptive statistical tools included frequencies, percentages, means, variances and standard deviations. Inferential statistic tools included Pearson’s Product Moment correlation and the multiple regression analysis.
 Findings: The findings indicated that interest rate (β3=0.52939, P=003) have significant positive effect on share price volatility. The study recommended that the monetary committee at CBK should maintain stable interest rates in order to encourage borrowing as it would foster investment in the NSE and other sectors.
 Unique Contribution to Theory, Practice and Policy: The recommendation is in line with the Loanable Funds Theory, as it seeks to establish a reliable and advantageous climate for borrowing. This approach allows businesses and investors to make more effective investment plans, as they can predict the cost of borrowing over time. Additionally, the monetary committee at the Central Bank of Kenya (CBK), responsible for setting the policy rate, should take into account how their decisions influence short-term interest rates in the economy. This consideration is important for the well-being of businesses, investors and the Nairobi Securities Exchange (NSE).

Macroeconomic Variables and Stock Market Development in Africa: Evidence from Nigeria

This study examines the macroeconomic determinants of stock market development in the Nigerian economy. This was aimed at ascertaining how INF representing real interest rate, GDP representing gross domestic product per capita, and BMS representing broad money supply has stimulate the stock market development in Nigeria. Historical data was collated and estimated employing the ARDL form of Ordinary Least Squares (OLS) technique. The empirical results indicate that only inflation had a negative and significant impacts on stock market development while real output and money supply exerted positive but insignificant impacts. On the basis of the findings of this study, the following recommendations are made: The monetary authorities have to regularly review their monetary policy direction to bring inflation lower than it is; Regulatory authorities and policy makers should ensure that there is general stability in money supply and exchange rates, while trying to put the inflationary trends under control and at the same time maintain a stable interest rate regime in the economy in order to achieve improvements in stock market performance to bring about desired economic growth and national development.

UNVEILING ECONOMIC DISTRESS IN SOUTH ASIA: DOES STOCK MARKET PERFORMANCE MATTER?

This study explores economic misery determinants in South Asia from 1990 to 2022, focusing on the moderating role of stock market performance. Economic misery, the dependent variable, is analyzed in relation to stock market performance, interest rates, education, population density, economic growth, remittances, and the interaction between stock market performance and interest rates. Using an autoregressive distributed lag model, results reveal shaded connections. Stock market performance shows a non-significant negative coefficient, while interest rates exhibit a substantial negative coefficient, indicating a strong association with reduced economic misery. Unexpectedly, education levels have a positive coefficient, while economic growth, population density, and remittances display negative coefficients, suggesting their roles in mitigating economic distress. The moderation effect of stock market performance and interest rates is notably significant, emphasizing their interplay in alleviating economic distress. Policymakers are urged to implement prudent monetary policies for interest rate stability, prioritize education, foster economic growth, plan urban development, and promote diversified income sources. Transparent and stable stock markets should be ensured through strategies enhancing investor confidence, establishing safeguards against market manipulation, and incentivizing long-term investments.

The Domestic Private Investment in Ethiopia: Contribution, Constraints, Trends and Determinants

The intended purpose of this study was to investigate the contribution, constraints, trends and determinants of private domestic investment in Ethiopia by taking annual data set of 34 years spanning from 1987-2021. The objective was achieved by collecting secondary data. Accordingly, domestics private investment has contributed a lot for the growth of the national economic despite the constrains. The domestic private investment in Ethiopia has faced severe trend due to trends in economics system in the country, i.e., pre-1974, 1974-1991 and Post 1991. The determining factors in this study included private investment, foreign direct investment, inflation rate, access to credit, GDP per capita, lending interest rate, human capital, exchange rate, public investment, taxation and political stability. Accordingly, GDP per-capital, political stability, public investment and lending interest rate have significant positive long run effect on private investment, while human capital and exchange rate have negative long run effect. Public investment and political stability have positive significant effect while lending interest rate and exchange rate have negative significant effect in the short run. Finally, expansion of infrastructure, increasing income generation mechanism for citizens, appreciation of domestic currency and creating fertile investment climate are some of the recommendations forwarded.

Monetary Policy Variables and Economic Growth in Nigeria

This study aimed to find out the impact of monetary policy variables on economic growth in Nigeria, the specific objectives were to: examine the extent to which a rise in liquidity ratio impacts economic growth in Nigeria, investigate the magnitude by which interest rate contributed to economic growth in Nigeria, and determine if an increase in the exchange rate has a significant impact on economic growth in Nigeria. The methods used in the study were unit root tests and ARDL tests. The empirical result showed liquidity ratio impacted positively on economic growth in the long run in Nigeria; interest rate impacted negatively on the economic growth in Nigeria; whereas exchange rate impacted negatively on economic growth in Nigeria. The study recommends that the Central Bank of Nigeria should ensure that deposit money banks maintained an adequate liquidity ratio that is needed for economic growth in the country. They should maintain a low and stable interest rate that will encourage investment in the country, and CBN should maintain a favorable exchange rate to attract foreign investors to invest in the country.

An Investigation into indirect effect of NPA on Bank's lending efficiency: A Global Perspective

Purpose: This study aims to examine the impact of the Gross NPA ratio on lending interest rates, bank capital to assets ratio, broad money (M3), and gross capital formation ratio in selected countries. Design/Methodology/Approach:A balanced panel data approach is employed, utilizing data from 25 countries over an 11-year period (2011-2021). Five different models are utilized to assess the influence of non-performing loans on the selected variables. Findings: The findings demonstrate that non-performing loans significantly affect lending rates, real interest rates, and the gross capital formation ratio. The Gross NPA ratio exerts an upward pressure on both lending interest rates and real interest rates as NPAs increase. However, no significant impact is observed on the bank capital to assets ratio and money supply. Practical/Research Implications: The findings of this study underscore the importance of effective NPA management in the banking sector. Policymakers and financial institutions should prioritize strategies that aim to control and reduce NPAs. By doing so, they can help maintain stable and favorable lending interest rates, which are vital for sustaining a healthy economic environment. Originality/Value: This study adds to existing literature by analyzing the influence of Gross NPA ratio on economic variables such as lending interest rates, bank capital to assets ratio, broad money (M3), and gross capital formation ratio. The findings emphasize the significance of efficient NPA management in ensuring stable interest rates and overall economic well-being, carrying practical implications for policymakers and financial institutions.

원금상환 유예방식을 이용한 부동산시장 안정화 방안

The purpose of the study is. The hard landing of the housing market due to soaring interest rates has a great impact on the national economy as well as individuals, raising the need for a soft landing policy to ease a hard landing of the housing market, that is, stabilize the housing economy. To this end, the housing market needs policies to prevent rapid price declines by reducing the number of sudden sales and allowing borrowers to safely pass the interest rate confusion period to stabilize people's housing lives and prevent financial institutions from becoming insolvent. To this end, this study aimed at stabilizing all real estate markets and gently stabilizing the housing market by delaying principal repayment for a certain period of time and paying interest only. As a result of the study, it was confirmed that the borrower's repayment burden could be maintained at the level of the interest rate stabilizer by delaying a certain percentage of the repayment principal, especially when 50% was applied, as the monthly repayment (3,053,000 won) and the interest rate stabilization period were similar. Therefore, this study suggests that a certain percentage of principal repayment prevention methods for a certain period of time have the effect of preventing rapid price declines in the housing market and allowing borrowers to safely pass the interest rate confusion period.

Central bank credibility and its effect on stabilization

This paper analyzes central bank credibility and its stabilizing effects for a set of emerging economies (EEs) and advanced economies (AEs). First, we analyze historical performance and the impact of inflation targeting on performance for nineteen countries and test whether this performance shows an interest rate stabilizing effect. To do this, we compute backward-looking credibility indicators whereby the performance metric is better when observed inflation is closer to the central bank’s explicit or implicit inflation target range. Second, we analyze whether inflation expectations have been anchored using a forward-looking asymmetric credibility indicator and whether this has a stabilization effect on reducing interest rate volatility and macroeconomic volatility in nine economies. The results show that inflation targeting improves performance significantly in nineteen countries. The findings support the hypothesis that credibility has an interest rate stabilization effect for EEs and AEs. Also, we found significant concurrent macroeconomic stabilization effects. The panel regression results show that forward-looking asymmetric credibility has a significant and negative impact on interest rate volatility, inflation volatility, output volatility, and macroeconomic volatility in both EEs and AEs. The results are robust to two different volatility measures. The findings have important policy implications: greater central bank credibility yields stabilizing effects.

Factors Affect Tourism Stock Price in Indonesia

The study aims to examine which factors affect the tourism stock price more. The study uses weekly exchange rate and tourism stock prices; the inflation, interest rate, and the number of tourism use monthly data. Using descriptive statistics, correlation matrix, augmented Dickey Fuller's unit root test, VAR, the Granger causality test, and Impulse Response. The results show that all the variables in our observations have no causal relationship. Interest rates do not have a causal relationship with exchange rates, inflation, number of tourists, and tourism stock prices. The VAR models show interest rate has a negative impact on tourism stock price, exchange rate, and the number of tourists positively impacting tourism stock price. Inflation has no impact on tourism stock price. A decrease in interest rates will encourage investment to develop a business. A decrease in the IDR exchange rate against the USD will lower the product's price, so foreign tourists will feel that Indonesian goods are getting cheaper; thus, they will spend more and increase the tourism company's share price. Regulators can use the research results by lowering and maintaining the stability of interest rates, exchange rates, inflation, and increasing the number of tourists to Indonesia.

THE ECONOMY DEVELOPMENT WITH RATIONAL MONEY MANAGEMENT AT THE EXPENSE OF CASH PAYMENTS

The purpose of the article is to ensure the stability of interest rates on monetary policy transactions in Armenia through cash and non-cash money, which will directly lead to the clarification of interest rates on monetary policy transactions and not monthly fluctuations. Research shows that the development / promotion of non-cash payments will not only stabilize the resource savings of its users within the economy, but will also lead to control of transparency, almost the entire amount of money circulation, as well as curbing the risk of cash temptation, embezzlement or similar. In the study, we found that, in case of non-cash transactions, transition from cash to non-cash has an impact on the monetary policy, the provision of financial resources by the financial institutions of the economy. In addition, the minimum provision for devices for the use of non-cash payment instruments by businesses is a very important circumstance, which we have presented as a novelty in several regulatory areas in the conclusion of the article. As a result of the research, we have identified the following scientific innovations: not to deduct more than 25% of the POS terminals acquired by banks for the service of noncash payments, not in operation, but to set clear directions for the use of these funds. The other new approach is for all businesses; to apply to banks for providing POS terminals or similar functionalities at cash registers, as well as to register bank accounts depending on the industry, and at the same time submit a statement to the State Revenue Committee within 20 days․

INVESTMENT CREDIT ANALYSIS BY ECONOMIC SECTOR IN INDONESIA

The purpose of this study is to analyze investment credit by economic sector in Indonesia through a simple linear regression model through the Least Squares (NLS and ARMA) approach. The findings show that the effect of interest rates on investment credit is not significant 0.334 with a R2 value of 1.06%. Meanwhile, the effect of inflation on investment credit is very significant 0.0021 with R2 of 10.31 %%. Then for the effect of investment credit on economic growth is not significant 0.654 or with an R2 value of 0.0023. Meanwhile, the effect of investment credit on formal employment is very significant 0.0033 with a R2 value of 9.5%. The results of the research findings recommend an evaluation of monetary policy carried out by the government, especially the stability of interest rates on investment credit and economic growth in Indonesia.

A Study on the Financing Effect of U.S. Debt from the Perspective of Modern Monetary Theory-Also on the Innovation Driving Effect of Monetary Sovereignty

The traditional view is that China uses the foreign exchange income earned from the trade surplus to purchase U.S. treasury bonds, which provides financing for U.S. government expenditures and maintains the sustainability of U.S. public debt. Based on the modern monetary theory, this paper analyzes this phenomenon and believes that China’s trade surplus cannot finance US government expenditures. U.S. debt issuance can exert interest rate stabilization effect, exchange rate stabilization effect, currency issuance effect and innovation “crowding-out” effect, but it has no financing effect. Therefore, this paper puts forward some policy suggestions, such as increasing the central government expenditure and the issuance of treasury bonds, and implementing the reform of floating exchange rate system, in order to increase the monetary sovereignty of our country and give full play to the government’s role in promoting domestic economic innovation.

Nexus between stock market capitalization and its Drivers: An ARDL model analysis

This paper aims to examine the nexus between the stock market capitalization and it drivers in Nepalese context using the Auto- regressive Distributed Lag (ARDL) approach using the secondary date from 1988/89 to 2018/19. The stock market capitalization is has used as dependent variable and macro-economic, company specific, stock market size, government policy, and political factors have been used as independent variables. It has reported the descriptive statistics, correlation analysis, data stationary, ARDL bound test of long-run relationship. The long-run relationships amongst the variables have been confirmed with the ARDL short-run dynamics and Error Correction Mechanism approaches. The results indicated that gross domestic product and interest rate are important macro-economic variables to explain the stock market capitalization, whereas the return on equity in the case of firm-specific variables. Moreover, both the government policy and political factors have found to influence the stock market capitalization in the context of Nepalese capital market. The findings suggest for a promotion of economic growth with low and stable interest rates, improve company’s return on equity, and implement supportive government policies with political stability to support the overall stability and growth of the country's stock market capitalization.

Aspects of influence of monetary policy on dynamics of agro-industrial com-plex development

The main approaches to the interpretation of the essence of monetary policy arepresented in the article, as well as the author’s definition are substantiated. The author highlights the main characteristics of monetary policy, in particular its target orientation, specific time horizon, the presence of a clear mechanism of monetary policy, as well as the coordinated and balanced using of a set of monetary instruments to achieve each goal. In addition, the components of the stability of the currency are substantiated, which includes price stability, stability of interest rates, as well as the stability of the national currency exchange rate. The influence of each of the components of the currency stability on the dynamics of agro-industrial complex development is substantiated. First of all, price stability ensures stable income from the sale of agro-industrial products in the domestic market. In this case, the dynamics of real earnings of agricultural enterprises will depend on changes in relative prices. Stability of interest rates is important in terms of incentives for agricultural enterprises to obtain additional credit resources. The impact of the stability of the national currency exchange rate on development of agro-industrial complex can be traced in two directions. First of all, agricultural enterprises are interested in stable exchnage rate of hryvnia due to the import of mineral fertilizers, seeds, feed additives, foreign equipment for the production and processing of agricultural products, agricultural machinery, etc. Devaluation of the hryvnia during the period of import purchases of necessary raw materials provokes a future increase in the cost of agricultural products. At the same time, agricultural enterprises are interested in a certain devaluation of the hryvnia, which will stimulate the export of agricultural products and ensure the stability of incomes in the national currency.