Positive Interest Rate Research Articles

Navigating Energy Market Cycles: Insights from a Comprehensive Analysis

In this article, we investigate the dynamics the intricacies of fluctuations during periods of economic expansion and contraction, and examining the connections between the length of energy cycles and the influential factors could affect them. Utilizing the extended BBQ algorithm, we firstly identify turning points and, then apply the Cox hazard Model to analyze factors that affect the cycle phases, including geopolitical conflict and economic situations over the period from January 1990 to July 2022. The results reveal the presence of asymmetry in growth phases, highlighting the need for policymakers to understand the factors driving these phases. Market expansion is driven by positive interest rate and US dollar shocks, while stability relies on competent management. During economic contractions, energy costs are influenced by economic growth. Geopolitical risks and economic uncertainty require effective risk mitigation, and policy changes significantly impact the energy market during expansion phases. The study also suggests that Conferences of Parties (COP) meetings have a nuanced influence on the energy market, warranting further research.

China's monetary policy framework and global commodity prices

This paper examines the effects of China's monetary policy on global commodity prices over the quarterly period 1996:Q1–2021:Q4. Using a Bayesian Structural VAR model, we evaluate the impact of interest rate shocks (as a price rule) and shocks to the monetary aggregate (M2) (as a quantity rule) on those commodity prices. Our main findings are fourfold. First, a positive interest rate shock has a negative and persistent effect on commodity prices, with beverages and metals commodity prices falling the most in response to such shock. Second, a positive shock to the growth rate of M2 has a strong impact on the prices of non-fuel commodities, agricultural raw materials, and metals. Still, the highly volatile food and fuel (energy) commodity prices are less affected. Third, while both the growth rate of M2 and the interest rate seem relevant macroeconomic stabilizers, the quantity instrument appears more effective than the price instrument in explaining commodity prices. Finally, while interest rate hikes are linked with a persistent rise in world uncertainty, monetary expansions lead to a long-lived fall in this variable. All in all, our study provides new evidence about the impact of China's monetary policy on global commodity prices using a rich dataset and an econometric setup that accounts for uncertainty.

Annuities for Lost Household Services Using Healthy Life Tables

Abstract Forensic economists have used Healthy Life Expectancy: 2018 Tables (Kurt V. Krueger, 2020) in valuing the loss of household or personal care services due to injury or death of their supplier. The tables are used to decide how far into the future to project the loss. We focus on two easily avoided errors that may arise in that decision. First, the present value (PV) of a healthy life annuity (HLA ending when death occurs) falls short of the PV of an annuity certain for the healthy life expectancy (HLE), at any positive interest rate. Second, services are lost only during the combined healthy life of the supplier and life of the recipient. The expected PV of the supplier’s healthy life and the recipient’s whole life falls short of either. The paper illustrates the size of these potential errors for various ages of the two people and net interest rates of 0-3%; the errors can be significant. We provide an Excel workbook at the Journal of Forensic Economics website that allows the user to avoid both errors for calculating the PV of relevant (healthy) life annuities, for any of the demographic groups covered in the HLE tables. The paper gives formulas used for the present values of the life tables.

Der digitale Euro: Chancen und Risiken einer digitalen Notenbankwährung

Abstract Central banks including the ECB have moved forward with plans concerning a central bank digital currency (CBDC) to be made available to the public at large. In particular, the announcement of a private stable coin by a consortium led by Facebook/Meta had served as a catalyst. Perhaps the fear of losing market share in terms of seigniorage or impairment of monetary policy played a role. By now, however, a widely-expressed criticism is that the CBDC constitutes a solution that is still in search of a problem to be solved. The argument put forth by the ECB that a CBDC is needed as a monetary anchor in the digital sphere carries little weight after closer inspection. Furthermore, potential advantages of a CBDC are partly reduced or precluded because of constraints imposed in order to minimise potential risks for the stability of the banking system and the business model of banks. For example, the model pursued by the ECB refrains from positive or negative interest rates paid on CBDC, imposes limits on transaction amounts and precludes a store of value function. At this point, the main potential benefit appears to be a possible reduction of transaction costs in digital payments and a possible contribution to keeping platform-based markets in digital ecosystems contestable. It remains an open question whether this is a task for central banks.

Simulasi Harga Opsi Call Asia Dengan Suku Bunga Tidak Konstan

In the financial world, the thing that is interesting for investors today is to predict a reasonable Asian Call Option price that does not cause the seller or buyer of the option to experience losses. The constant interest assumption is more often used by previous research as an assumption in predicting the price of Asian Call Options. This is not in line with the fact that interest rate movements are not constant. The use of incorrect assumptions will affect the accuracy of prediction results. In overcoming this problem, this study aims to predict the price of Asian Call Options with non-constant interest rates using Monte Carlo simulation. The non-constant interest rate model used is Cox-Ingersoll-Ross (CIR) because this model produces positive interest rates. This study begins with a screening of Normally distributed interest rate data. The data is used to determine the parameters of the CIR interest rate model. Next, an Asian Call Option price simulation with non-constant interest rates was carried out and ended by analyzing a graph of the Asian Call Option price simulation results with non-constant interest rates. The simulated price result of the Asian Call Option with non-constant interest rates converged at the value of $170.82. Based on the price chart of Asian Call Options with different strike prices, the larger the strike price causes, the larger the Asian Call Option price, which corresponds to the price characteristics of the Asian Call Option. In addition, by extending the maturity period, the price of Asian Call Options with non-constant interest rates is greater according to the price characteristics of Asian Call Options.

Analisis Produksi Kelapa Sawit Indonesia

As the biggest producer in the world, trend of Indonesia palm oil production keeps increasing. Therefore, palm oil industry is favorite in Indonesia’s plantation sector and agriculture export. Besides having contribution on Indonesia GDP, palm oil industry also absorbs many labors. The objective of this research is to study the effects of micro and macro economics variables on the total palm oil production, crude palm oil and kernel palm oil. Using time series data 1986-2020 and non linear multiple regression model estimated using ordinary least square method, this research found that area, palm oil export and exchange rate has a positive significant effect, inflation rate and interest rate has a negative significant effect whereas palm oil import has no significant effect on the production of total palm ol, crude palm oil and kernel palm oil. Hence, besides maintaining the stability of exchange rate, inflation rate and the interest rate fluctuation, the government have to put some efforts to develop researches to increase the productivity of palm oil area.

Target return as efficient driver of risk-taking

PurposeThis paper examines whether target returns act as specific goals that impact risk-taking when individuals make investment decisions.Design/methodology/approachUsing an experimental setting, the authors assign either a low or a high target return to participants and ask them to make independent investment decisions as the risk-free rate fluctuates around their target return and, for some of them, becomes negative.FindingsBuilding on cumulative prospect theory, the authors find that the prevailing reference point of participants is the target return, regardless of the level of the risk-free rate. This result still holds even when the risk-free rate is negative, suggesting that (1) the target return drives risk-taking more than does a zero-threshold and (2) negative rates are limited as a tool to stimulate appetites for risk. In a follow-up study, the authors show that these conclusions remain valid when the target return is endogenously determined.Originality/valueThe authors' original approach, which pioneers the use of target returns in both the positive and negative interest rate contexts, provides insightful results about the “reach for yield” among regular people.

The Relationship Betwen Knowledge Level Of The Covid-19 Vaccine On Interest In Participation In Covid-19 Vaccination In YARSI University Medical Faculty Students Batch 2019 And Its Review By Islamic View

KEYWORDS Vaccine, COVID-19, Pandemic, Medicine, IslamABSTRACT Background: In 2020, the whole world is experiencing the Covid-19 pandemic. This virus originated in China, precisely in the city of Wuhan, China and was discovered at the end of December 2019. Indonesia was the first country in Southeast Asia to be in the first position of confirmed positive cases of Covid-19. Efforts to break the transmission line from the Covid-19 virus are not only by equalizing vaccination coverage, but also the need for knowledge.Method: This type of research is descriptive quantitative research with cross sectional. The sample in this study were students of the Faculty of Medicine, YARSI University Class of 2019 as many as 171 respondents. Data collection was carried out using a questionnaire to determine the level of knowledge and also the level of interest in student vaccination participation related to the use of the Covid-19 vaccine. The data analysis used in this research is univariate data analysis and bivariate data analysis.Results: The characteristics of the respondents in this study consisted of women (71.9%) and men (28.1%) taken from the class of 2019. In this study, the percentage of respondents who had a good level of knowledge was 96.5%, then for respondents who had sufficient knowledge level is 3% and respondents who have less knowledge level are 0.5%. For the percentage of respondents in the interest of participation, the positive interest rate is 99.5% and the negative interest rate is 0.5%. The results of the bivariate analysis test between students' knowledge and interest levels showed that the results of the Correlations p-value test were 0.788 where p> 0.05Conclusion: Level of Knowledge About Covid-19 Vaccine and Interest in Participating in Covid Vaccination has a strong correlation.

Monetary policy effects in times of negative interest rates: What do bank stock prices tell us?

This paper investigates bank stock performance following different monetary policy actions in times of positive and negative interest rates. Controlling for the broader stock market, monetary policy announcements that cause an unanticipated downward shift in the yield curve and a flattening of the shorter-end of the yield curve are found to persistently reduce bank stock prices once the interest rate environment is negative. Consistent with the deposits channel of monetary policy, the effects are larger and more persistent for banks that are relatively dependent on deposit funding. By contrast, a surprise movement in the slope of the longer-end of the yield curve does not impact bank stock prices in times of negative interest rates. Accounting data confirm that a parallel drop in the yield curve following a monetary policy decision in a negative interest rate environment hurts banks through shrinking deposit margins.

Will Real Estate Fail When Interest Rates Rise?

The current yield on the 10-year T-bond bottomed out at 49.9 bps in 2020 and has since risen to 316.7 bps, a 535% proportionate increase. Consequently, 7–10-year and 10–20-year US Treasuries delivered total returns of −15.0% and −27.7%, respectively. Institutional and retail investors are actively seeking bond substitutes in response to a fear that the US economy has embarked on a multidecade-long era defined by ever-increasing interest rates. Commercial real estate is the first bond substitute they are considering. Unfortunately, data since 1971 strongly support the conclusion that publicly traded real estate investment trusts (REITs) carry a positive interest rate loading of sufficient size that their use as a bond substitute is likely to make the situation worse. In contrast, data since 1977 support the conclusion that private direct ownership of institutional bricks and mortar carries no such interest rate factor loading. Carried to its logical conclusion, these observations suggest the exploration of something like a 130/30 portfolio (130% long the NFI-ODCE Index and 30% short the FTSE Nareit All REITs Index).

The negative natural rate of interest in the modern theories of Liquidity Trap and Secular Stagnation: back to Böhm-Bawerk via Samuelson

The negative natural rate of interest is since two decades eliciting theoretical and policy debates. It re-emerged, after a relatively long time, in Krugman’s Liquidity Trap model. Later, it was placed at the hearth of the Secular Stagnation theory by Summers. It is argued that Krugman’s negative natural rate of interest ensues from theoretical premises analogous to those present in Samuelson’s overlapping-generations model. In turn, Samuelson obtained a negative equilibrium interest rate by opportunely recasting Böhm-Bawerk’s three causes for a positive rate of interest. The present paper illustrates and analyses this line of thought until its recent developments.

FOREIGN EXPERIENCE OF PLACING FUNDS OF INDIVIDUALS AND LEGAL ENTITIES ON BANK DEPOSITS

The purpose. The work is dedicated to the analysis of the peculiarities of placing funds of individuals and legal entities on bank deposits in foreign countries in order to use the acquired results in domestic practice. Methods. In the process of writing the articlesuch methods as method of theoretical generalization, method of economic analysis withthe usage of a graphical method, as well as methods of comparison, systematization and logical generalizationwere used. TheResults.In thearticle the approaches to pricing of deposit products in commercial banks of foreign countries were decomposed by analyzing the dynamics of interest rates on deposits of individuals and legal entities during 2020-2021. The presence of both positive and negative interest rates on deposit products was defined. Thus, during the analyzed period, commercial banks of countries of the European Union offered legal entities to open accounts with a rate from -0.5% to 0.86%, and individuals – from -0.22% to 1.56%. The main types of deposit products offered by commercial banks for individuals were identified. Thus, the authors present and describe the following types of deposits: savings, term and indexed deposits, deposits opened remotely for individuals that are moving to the country for permanent residence or study, deposit products for customers of VIP segment, newborns, and deposit products with registration of the certificate of deposit. The peculiarities of taxation of deposits of individuals in the countries of the European Union were outlined and the absence of taxation of deposits in the Eastern countries was revealed. The current deposit insurance systems of individuals and legal entities in the countries of the European Union and in the United States of Americawere analyzed and a comparison with the existing domestic system was made. The practical significance. The results of the study of deposit activities of foreign commercial banks can be used by commercial banks of Ukraine in developing deposit products and improving existing deposit policy, as well as by scientists, specialists and graduates from higher education institutions in future research on deposit activities of commercial banks.

The macroeconomic implications of zero growth: a post-Keynesian approach

This paper tries to clarify some important aspects of the zero-growth discussion, in particular the consistency of stable zero growth with positive profits and a positive real interest rate. Starting from an accounting perspective, the authors analyse the implications of zero growth and clarify the stability conditions of such an economy. This is complemented with a monetary circuit approach – which, like any model, has to respect the national income and financial accounting conventions. The latter allows the authors to show that a stationary economy, that is, an economy with zero net investment, is compatible with positive profits and interest rates. They also argue that a stationary economy does not generate systemic financial instability, in the sense of rising or falling financial-assets– or financial-liabilities–income ratios, if the financial balances of each macroeconomic sector are zero. In order to analyse the dynamic stability of such an economy, they make use of an autonomous demand-led growth model driven by government expenditures. They show that a stable stationary state, with zero growth, positive profits and a positive interest rate, is possible in that model. However, the stable adjustment of government-expenditures–capital and government-debt–capital ratios to their long-run equilibrium values requires specific maxima for the propensity to consume out of wealth and for the rate of interest, assuming a balanced government budget and zero retained earnings of the firm sector.

Tractable Term Structure Models

We introduce a new framework that facilitates term structure modeling with both positive interest rates and flexible time series dynamics but that is also tractable, meaning amenable to quick and robust estimation. Using both simulations and U.S. historical data, we compare our approach with benchmark Gaussian and stochastic volatility models as well as a shadow rate model that enforces positive interest rates. Our approach, which remains arbitrarily close to arbitrage free, offers a more accurate characterization of bond Sharpe ratios because of a better fit of the volatility dynamics and a more efficient estimation of the return dynamics. Further, the shadow rate and stochastic volatility models exhibit important restrictions that are largely absent in our approach. This paper was accepted by Agostino Capponi, finance. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2021.4214 .

Positive Risk-Free Interest Rates in Decentralized Finance

Positive Risk-Free Interest Rates in Decentralized Finance

The Optimum Allocation of Consumption of the Fisherian Shipwrecked Sailors

The theory of interest of Irving Fisher was designed to explain positive, zero, and negative interest rate. One of the intertemporal equilibria with the zero interest is an economy with a given supply of hardtacks for shipwrecked sailors. Hardtacks can be fully saved for the future, but their stock cannot be enlarged by production. Fisher presented several streams of consumption of hardtacks over time. This paper shows that the Fisherian paths are not consistent with the dynamic optimization model. Different trajectories of the optimum consumption are calculated and sketched. Their shape depends on the value of the subjective discount rate, the intertemporal elasticity of substitution in consumption, and the lifetime horizon of the shipwrecked sailors. None of them resemble the original Fisher examples.

Strategic Provision of Trade Credit in a Dual-Channel Supply Chain

This study focuses on a a dual-channel supply chain that consists of a capital-constrained brick-and-mortar retailer and a manufacturer, where a manufacturer can simultaneously sell products through a traditional retail channel and a direct online channel. Supplementary pricing strategy and competitive pricing strategy are simulated in our model, and we find that the former one is the better choice for the manufacturer when the retailer suffers capital constraints. In our analysis, the capital constraint on retailer could mitigate the price competition between two channels, and it may be beneficial to the manufacturer under certain conditions. Our findings show that the manufacturer should strategically provide trade credit to retailers rather than unconditionally provide it. We present two trade-credit strategies (trade credit with positive interest rate and trade credit with zero interest rate) and suggest that the manufacturer should choose an appropriate trade-credit strategy according to the initial capital of the retailer. To guide the manufacturer when and how to provide trade credit, we conduct several numerical simulations based on our results and further plot out a graph to direct the manufacturer to an appropriate strategy of trade credit.

Measuring the effects of monetary and fiscal policy shocks on domestic investment in China

This paper investigates the dynamic effects of monetary and fiscal policy shocks on Chinese aggregate investment and three of its components. Our findings are as follows: First, we find that government spending shocks have no significant impact on aggregate investment or its components. Second, we compare the effectiveness of two kinds of monetary policy and show that shocks to the benchmark lending rate have a non-significant effect on aggregate investment, while shocks to the money supply have a positive and significant effect on aggregate investment only during periods of expansion. Third, a positive interest rate shock has a significant negative effect on state-owned investment, while it has an insignificant impact on private investment and foreign investment. Overall, our results show that both government spending policy and monetary policy have rather limited impacts on boosting domestic investment in China. Thus, it is not necessary for the Chinese government to implement a large-scale economic stimulus package to boost domestic investment and output growth.

An Assessment of Samuelson’s Ricardo-Sraffa Trade Model

This article assesses Samuelson’s attempt to introduce Sraffa’s framework of “production of commodities by means of commodities” to the neoclassical-Ricardo trade model. We slightly modify Samuelson’s model to consider, on the one hand, more commodities than countries and, on the other hand, a positive rate of interest and full international (finance) capital mobility. In the first case, comparative advantage is unable to predict the direction of trade. In the second case, the principle does not warrant the existence of trade. In conclusion, a closer look at the neoclassical-Ricardian trade model through the lenses of Sraffa casts more doubts than certainties of the comparative advantage theory.

Black\u2019s model in a negative interest rate environment, with application to OTC derivatives

The most common application of Black’s formula is interest rate derivatives pricing. Black’s model, a variant of Black-Scholes option pricing model, was first introduced by Fischer Black in 1976. In recent market conditions, where global interest rates are at very low levels and in some markets are currently zero or negative, Black model—in its canonical form—fails to price interest rate options since positive interest rates are assumed in its formula. In this paper we propose a heuristic method that, without explicit assumptions about the forward rate generating process, extends the cumulative standard normal distribution domain to negative interest rates and allows Black’s model to work in the conventional way. Furthermore, we provide the derivations of the so called five Greek letters that enable finance professionals to evaluate the sensitivity of an option to various parameters. Along with the description of the methodology, we present an extensive simulation study and a comparison with the Normal model which is widely used in the negative environment option pricing problems.