Key Interest Rate Research Articles

Interest Rate Channel and Market Rates in Case of Uzbekistan – Svar Approach

In this scientific work, is studied the influence of the interest rate channel of the transmission mechanism on market rates. The analysis was carried out in case of Uzbekistan, using statistical data of 36 commercial banks for the period 2019M01-2024M06. According to the results of the analysis, it was found that the influence of the Central Bank key interest rate on the short-term interest rates on total time deposits and the short-term interest rates on total loans of legal entities is strong.

How Much Government Debt Is Now Acceptable for Russia?

The period of near-zero interest rates is over, and the recent noticeable growth in the debt burden, as well as in the cost of interest payments to service that debt, has made it more challenging for national and global financial regulators to strike a balance between keeping budgetary parameters stable and spurring economic development. This article proposes a “safe” threshold for the debt burden such that the ac-cumulated debt would not diminish prospects for growth and degrade fiscal sustainability. A significant negative linear effect of government debt on GDP growth rates from 1980 to 2021 has been observed for a total sample of 57 countries. According to the Hansen test, there are relatively safe thresholds for high- and middle-income countries at 56% and 24% of GDP, respectively. An assessment of the impact of government debt on the dynamics of interest expense indicates that there is a stable positive relationship between them. The conclusion drawn is that the thresholds beyond which an acceleration in the growth of interest payments would produce an increase in the debt burden stand at 51% and 29% of GDP, respectively, for the same groups of countries. However, the current conditions of unprecedented sanctions that restrict access to foreign borrowing together with a double-digit key interest rate were not taken into account for calculations based on the retrospective data. When those factors are included, the authors’ projections indicate that Russia’s safe level of debt should not exceed 20% of GDP.

Reasons for the Bank of Russia's key interest rate increase

Reasons for the Bank of Russia's key interest rate increase

Results of the Far East Mortgage Program for Consumers, Developers, and the Government

The volume of mortgage loans issued in eleven regions of the Far Eastern Federal District at the end of 2023 increased 2.5 times by the start of the Far Eastern Mortgage program in 2020. The most interesting result of the program is an increase in demand for primary real estate and a simultaneous decrease in the affordability of this housing. Since the start of the program, prices have increased by 116% vs. 26% while maintaining historical growth rates. By the end of 2021, the price of an apartment, including interest under the Far East Program, has become higher than that of an apartment while maintaining the historical rate of price appreciation under the family mortgage rate. The program has effectively made housing less affordable. The main conclusion is that for program participants (young families under 35), the most effective benefit of stimulating home buying is lower interest payments, not down payments. The main beneficiaries of rising prices and the scale of lending are developers. Considering the increased price of construction materials, the developers’ margin in the Far Eastern Federal District in 2023 increased to 58%. On the one hand, the government has achieved its goal of boosting the housing market in the Far East and has found an effective tool to encourage young families to buy real estate. This is evidenced by the extension of the program until 2030. On the other hand, several economic shocks led to a significant increase in the key interest rate and the accompanying growth of the program implementation costs.

Zur aktuellen Krisenstimmung im Wohnungsbau

Abstract This article examines the recent downturn in Germany’s housing construction sector, marked by a significant drop in business climate indicators. Key factors include material shortages, order cancellations, financing constraints, and a lack of new orders, which have worsened since the COVID-19 pandemic and the Ukraine war. A central driver for this development was the sharp and rapid increase of the ECB’s key interest rate and the subsequently deteriorating financial conditions for house building. A comparison with other European countries is also provided. The outlook remains bleak, with continued pessimism expected in the housing construction sector.

On investment strategy of the company adjusted to the state monetary policy

The author examines the impact of the policy of the Bank of Russia, information asymmetry and business profitability on the investment agenda of Russian public companies. The tight monetary policy of the state is a restraining factor in the economy and is caused by a reduction in corporate investment. Faced with increased funding and external sanctions, Russian companies are forced to focus on internal sources of investment financing. Using the analysis of panel data, the author substantiates that companies act in line with a precautionary motive, saving some money for subsequent financing of capital investments. Low information asymmetry makes debt financing a less expensive procedure. The tangibility of assets is an indicator or hallmark when a company evaluates the cost of raising capital. The author chose a regression model with fixed effects to prove the impact of the increase in the cost of funding on the investment opportunities of the company. The unobservable individual effect may include various indicators, in particular, the quality of corporate governance, fluctuations in financial markets. Share price growth is directly related to the return on assets. An increase in the key interest rate worsens the company’s investment prospects. To save money the company can turn to debt financing in conditions of low information asymmetry. Tangible assets can serve as collateral, and debt is a fairly inexpensive financing option, even under financial constraints. To expand investment demand in the context of the main objectives of the National Security Strategy of the Russian Federation it is necessary to link the key interest rate of the Bank of Russia to profitability in key sectors of the economy.

Financial mechanism for labor pension formation based on the deposit book method

Subject. This article discusses the pension system in force in Russia. Objectives. The article aims to develop an algorithm for determining the labor pension amount. Methods. For the study, I used economic and mathematical research methods. Results. The article proposes to organize the payment of labor pension in the form of annuity payment based on the deposit book method. Conclusions. The labor pension amount should be formed in accordance with the accumulative principle and unambiguously determined by the amount of accumulated insurance premiums, the value of the key interest rate of the Central Bank of the Russian Federation, and the expected period of pension receipt.

Effectiveness of Monetary Policy in Controlling Inflation from the Perspective of the Tunisian Economy

This paper aims to empirically examine, for Tunisia, the effects of monetary policy in fighting inflation using ARDL modeling. The study is based on time series data from 2000 to 2021. The results show that the key interest rate has a positive and statistically significant effect on long-term inflation. The monetarist theory is valid in the short term, while the structural theory of inflation is valid for the case of Tunisia in the short and long term. As a result, monetary policy in Tunisia, applied with the aim of curbing inflation, is not effective. The study therefore recommends that economic policies should focus directly on the factors behind inflation, mainly imported inflation.

재개발 사업기간의 영향요인 분석에 관한 연구

The primary goal of this research is to determine the impact of an amendment to the Urban Improvement Act on the duration of redevelopment projects. Basic statistics analysis results reveal an increased redevelopment project period since the amendment, high number of households and tenants of existing houses, and high ratio of general sales and rental of completed houses. Meanwhile, the results of multiple regression analysis, which uses the period from the establishment of the implementation union as a dependent variable, reveal that the amendment increases the project period, and the project period increases if the key interest rate rises and the GDP growth rate is high. With an increased key interest rate, GDP growth rate, and construction investment, the project period decreases. Meanwhile, when the Seoul land price and price index increase, the project period increases. The amendment has improved public interest by increasing the supply of rental housing, but administrative support for the redevelopment of unviable areas must be strengthened to prevent urban polarization.

Interest rate derivatives in lending to construction companies in the Russian market

Subject. This article examines interest rate derivatives as a way to hedge the risks of construction companies in a period of high uncertainty in financial markets. Objectives. The article aims to build an approach to estimating the price of interest rate derivatives, taking into account the specifics of lending to construction companies in the Russian Federation. Methods. For the study, we used the Black model and a regression analysis. Results. The article presents the first version of the author-developed model for estimating cap options on the key interest rate of the Central Bank of the Russian Federation when lending to construction companies. Conclusions. It is necessary to make an amendment to the traditional model for estimating premiums for the cap option on the key interest rate of the Central Bank of the Russian Federation when lending to construction companies, taking into account the specifics of pricing such loans.

THE IMPACT OF THE DEVELOPMENT OF THE HOUSING CONSTRUCTION INDUSTRY ON THE IMPROVEMENT OF THE SOCIO-ECONOMIC SITUATION OF THE REGIONS OF RUSSIA

The article is devoted to the analysis of the development of housing construction in modern conditions and its impact on socio-economic development. The reasons are identified that contribute to a decrease in the dynamics of the commissioning of residential buildings, in particular, a slowdown in the use of mortgage lending, geopolitical changes, an increase in the key interest rate by the central bank, a reduction in the provision of preferential loans in the budget housing segment and an increase in rates for them, rising housing prices.
 The authors substantiate that during the prolongation of the development program, support for housing construction for the next period, it should be based on the current principles given in the work. The key negative features of the current model of housing construction development are highlighted.
 It is concluded that a well-built, well-developed system of housing construction development is able to solve acute issues of improving the living conditions of citizens and contribute to the provision of housing for those in need, to maintain the attractiveness of investing money in this industry, both from developers and investors, to ensure the preservation of cultural and historical, architectural features of territory planning, ensure the housing
 construction industry an effective state under the influence of external and internal influences and, in general, contribute to the sustainable socio-economic development of the regions.

The determinants of the rate of return on shipping sale-leasebacks*

ABSTRACTThis study investigates the determinants of the rate of return on shipping sale-leaseback (SLB) transactions. Since the credit crunch in the shipping industry after the 2008 crisis, SLB has emerged as an alternative funding source. However, little is known about the use of SLBs in the shipping industry. Therefore, this study analyzes 62 shipping SLB transactions occurring between 2017–2022. Examining 23 factors related to financial characteristics, firm- and vessel-specific aspects, and shipping market indices, this study finds that the SLB rate of return is negatively associated with the operating margin of a shipping firm, and this result is robust even when controlling for variations in the key interest rate. In addition, with winsorized values of the financial ratios that fluctuate during the sample period, it is also found that a lower rate of return is required for vessels with time-charters. The findings of this study provide shipping companies with valuable implications for understanding the cost of debt financing.

THE WORLD IS ON THE THRESHOLD OF A NEW FINANCIAL AND ECONOMIC CRISIS

The paper provides an analysis of the current state of the world economy and a short-term forecast of its development. It is shown that the USA and the EU have become the epicenter of a new financial and economic crisis and today their economies are already in a state of stagflation, characterized by high inflation and low growth rates. The tightening of monetary policy, through aggressive increases in key interest rates by the Federal Reserve and the ECB, to curb inflation and reduce it to the target level of 2% per annum, led to a sharp reduction in investment in the economy, which, in turn, will cause recessions in 2024 with a recession depth of 1.2–1.4% in the US economy and 1.9–2.1% in the EU economy. Vanguard developing countries will only slow down slightly, and their leaders, China and India, will maintain high rates of economic growth at 4.5 and 6% per year, respectively, in the medium term. The crisis will lead to a cascade of defaults among heavily indebted, low-income developing countries. As a result, the crisis will also engulf the global economy, significantly reducing its growth rate from 5.2% in 2022 to 1.7% in 2024, with a sharp decline in global trade volumes. Recommendations are given that can contribute to a quick and successful exit from the current crisis.

The economic consequences of military conflicts: The Ukrainian context

Conflict, as a unique form of interaction involving the clash of interests between participants in social relations, serves as a necessary condition for the development of civilisation. Contradictions have accompanied humanity throughout its history, finding reflection in the literature, art, and history of various countries and peoples. The emergence and progression of any conflict have economic consequences, stemming from the objective confrontation between opposing forces. The modern economic landscape is increasingly characterised by deepening disparities and a shrinking gap between crises and conflicts. The purpose of this article is to identify the periods that have impacted Ukraine’s economy and to analyse the economic consequences of these periods. The author posits that the military period has had a detrimental effect on Ukraine’s economy. To achieve this goal, the research employs methods such as scientific abstraction, generalisation, synthesis, analysis, comparison, as well as graphical and tabular methods for data interpretation. This approach has allowed the identification of three main periods of conflict in Ukraine: the brewing conflict in Eastern Ukraine (2013-2014), the pandemic period (beginning in 2019), and the military period (starting in 2022). For each of these stages, the economic development processes in Ukraine were analysed. It is noted that conflicts are inherently dangerous, posing threats not only to the sovereign governance of territories but also to the economy of Ukraine and the global economy at large. Based on the analysis of Ukraine’s economic development scenarios without the state of war, the main factors that would contribute to economic recovery in the following areas were highlighted: GDP, unemployment rate, inflation rate, and the NBU’s key interest rate. The practical value of this work lies in the identification of three periods of military conflicts in Ukraine and the analysis of their key consequences. This approach helped to demonstrate that the war in Ukraine not only weakens the Ukrainian economy but also affects the economies of neighboring countries. The main economic losses for Ukraine during these conflicts include the loss of human resources and the resulting regional development disparities

Unconventional Monetary Measures During the COVID-19 Pandemic: A Case Study for Central and Eastern European Countries

Abstract The COVID-19 pandemic had major negative repercussions on the countries from Central and Eastern Europe (CEE), which experienced almost similar declines in the economy in 2020. Against this background, central banks from CEE initiated unconventional monetary policy measures aimed at mitigating the economic and social effects of the pandemic. The purpose of this article is to analyse the CEE central banks’ response to the pandemic crisis, i.e., the response of the Czech Republic, Hungary, Poland, and Romania, and to unveil the particularities of the unconventional monetary policy adopted by these states. To achieve this goal, the article presents a chronology of the main decisions adopted by CEE central banks during the pandemic and the dynamics of these central banks’ assets. The main findings suggest that CEE monetary authorities, like major central banks, initiated the first measures to counter the negative effects of the pandemic on the economy in March 2020. All of them cut the key interest rate and injected liquidity through open market operations in order to support lending to the real economy. However, the magnitude of these measures was different depending on the economic and financial systems’ peculiarities. Moreover, not all of them initiated purchases of assets or new lending facilities.

An analysis of the Russian financial market basis

Subject. This article analyzes the basis of the Russian financial market. Objectives. The article aims to clarify the basis of the Russian financial market. Methods. For the study, I used a systems approach based on a statistical analysis. Results. The article reveals a decrease in the reaction of inflation to an increase in the interest key rate and its growth with a decrease in the key interest rate. The article also finds that the Bank of Russia is injecting the digital ruble in order to increase its regulatory capacity. The study outlines a provision on the transfer of hedging of monetary policy risks to the level of relations between the Ministry of Finance of Russia and credit institutions, increasing their likelihood by selling yuan from the Russian National Wealth Fund and introducing a digital ruble. Conclusions and Relevance. The results of the study regarding the basis of the Russian financial market orient the expert community at the time of marginal income fixing and can be useful for the expert community in terms of the Russian financial market's development.

Developing Monetary-Credit Tools in National Economy of Russia

The article analyzes work of the Bank of Russia and puts forward suggestions for new monetary-credit tools, which can ensure progressive development of country economy in conditions of rejecting one-polar system of international relations. Policy of the Bank of Russia is characterized by consistent use of such tools as ‘sterilization’ of money stock, its ‘pressing’ by key interest rate, gold selling. These methods implementing basic principles of market fundamentalism in the monetary variant hinder the development of national economy. To replace them the authors propose to fix in the legislative way a direct responsibility of the Ministry of Finance of Russia and the Bank of Russia for attaining planned macro-economic figures and to introduce their coordinated work in line with the Ministry of Economic Development of Russia that can be headed by Deputy Prime Minister. According to the authors it is advisable to pass to policy of real post-capitalism and interest-free economy, as elimination of credit repayment can become a serious incentive factor of intensification for entrepreneurial and working activity. In the monetary sphere it is recommended to introduce the digital ruble in two forms that could delimit deals: with industrial and consumer goods. As a result Russia could show an example of successful solution of the problem acute for many countries, i.e. development of a new system of monetary and credit relations, which on the basis of proposed tools can guarantee a real growth in production and people well-being.

Do oil price shocks differently matter for oil exporter and importer developing countries?

PurposeThe authors empirically aim to study the implications of uncertainty generated by oil price volatility on some key macroeconomic variables, including production, exchange rates and interest rates, of both oil-exporting and oil-importing countries. Using a block exogeneity structural Vector Auto Regression (VAR) model that mutes the effects of domestic variables on global factors and that is suitable for small open economies because of significant differences in the responses of domestic production in oil-importing countries will most likely decrease through reducing planning horizons, postponing investment projects and relocating resources more inefficiently.Design/methodology/approachThe authors integrated into the structural vector autoregressive (SVAR) model the block exogeneity feature since all the countries in this study are small open economies that cannot influence the global economic variables. The block exogeneity feature imposes the restriction that the domestic variables have neither a contemporaneous nor a lagged impact on the global variables. This model has eight variables: oil price volatility, world demand and federal funds rate as the global variables; and domestic production, monetary aggregate, inflation rate, exchange rate and interest rate as domestic variables. The authors assemble the data for 12 developing countries for which the necessary data for the analysis are available: six oil exporting countries (Russia, Saudi Arabia, Iran, Kazakhstan, Mexico and Colombia) and six oil importing countries (Turkey, India, Philippines, Poland, South Africa and Indonesia).FindingsThe results point out significant differences in the responses of macroeconomic variables to oil price volatility shocks between oil-exporting and oil-importing countries. Furthermore, the local currencies of these countries depreciate due to concerns about possible current account worsening. In response to the shock, domestic interest rates are reduced so as to alleviate the negative exposure of the shock on domestic economic activity. While domestic production in some oil-exporting countries (i.e. Russia, Saudi Arabia and Iran) increases during oil price uncertainty; in some other countries (i.e. Mexico, Kazakhstan and Colombia), domestic production decreases.Originality/valueSeveral components of the study contribute to its novelty. One of them is the period under consideration. The time frame that encompasses the most significant geopolitical and financial events, such as the Middle East Spring and the global financial crisis of 2007–2008. The research was conducted using the block-exogeneity SVAR model, which includes 12 oil exporting and importing developing countries. With this model, the global dynamics, particularly the energy market, that these nations may influence and are influenced by, i.e. global and nonglobal factors can be constrained. This makes it easy to determine the various effects prices have on macroeconomic variables.HighlightsOil prices and volatility still matter to the global economyMonetary and fiscal policy interventions in response to oil price volatility create uncertainty and impede investment activityThe response of macroeconomic variables to volatility shocks in oil prices varies across oil importers and exportersInterest rates help stabilize production in oil-importing economies that have well-functioning financial markets

Is there a Neo-Fisher Effect in the case of Selected Central and Eastern European Countries?

At the current juncture, the global economy is facing adverse supply side shocks amid the ongoing war in Ukraine. The persistent energy crisis and a potential flare-up in bottlenecks in global value chains are expected to further fuel inflationary pressures. Against the background of escalating prices, central banks have already started increasing the key interest rates.

The BRICS Mechanism as a Platform to Support Russian Interests in the Hostile Global Economic and Financial Environment

The purpose of writing this paper is to show the changes that happened over the past two decades in the role of the BRICS economies in the world financial system and the world economy in general. Methods. Using comparative analysis techniques, the author shows the positions of the major centers of the global economy in terms of both their GDP numbers measured at official exchange rates and purchasing power parity. The results of this article include suggestions for the new world economic order, a reform of the world financial system, and the creation of a financial safety network for the BRICS during the period of rising global prices, key interest rates and debt. The practical significance of the paper is that its main conclusions and recommendations can be used when formulating strategies for further development of the BRICS cooperation mechanisms, such as the New Development Bank and a network of mutual currency agreements to support trade and investment within the BRICS as well as their partners.