Reduction In Interest Rates Research Articles

Simulating the Impact of the Economic Sustainability Plan on the Performance of the Nigerian Economy in the Post COVID-19 Era

This study examines the impact of Economic Sustainability Plan (ESP) on the performance of the Nigerian economy as a national economic resilient policy in the post COVID-19 era within the framework of a macro-econometric model. The study is hinged on the Keynesian general theory of employment, income and interest. Annual time series data spanning from 1970 to 2019 for within sample forecast, and a six-year out-of-sample forecast spanning from 2020 to 2025 were used. The policy scenario of 21.3 percent increase in government expenditure under the ESP as a stimulus package was simulated and the findings showed that increase in government expenditure under the ESP in critical areas would bring about significant impact on the macroeconomic performance of the Nigerian economy, especially on employment, inflation, economic growth and balance of payment in the post COVID-19 era. Emergent from these findings, the study recommended among others that the government should mobilize resources to finance the ESP in order to stimulate the economy in the post COVID-19 era by ensuring prudential fiscal management of resources; and the Central Bank of Nigeria (CBN) should ensure that financial institutions saddled with the responsibility of disbursement of intervention funds reduce interest rate from 9 percent to 5 percent as reflected in the ESP.

Adopting population-based interventions towards sustaining child health services in the midst of COVID-19 in sub-Saharan Africa: application of the socio-ecological model.

Child health services remain one of the most cost-effective strategies in reducing child mortality which is still disturbingly high in sub-Saharan Africa (SSA). Efforts by governments and other stakeholders in response to the COVID-19 pandemic have inadvertently disrupted the provision of other essential health services including those focusing on children. This comes at the backdrop of the World Health Organization´s guidelines for countries to sustain priority services while fighting the COVID-19 pandemic. Underpinned by the Socio-Ecological Model (SEM), we propose population-based interventions which could help in sustaining child health services in the midst of COVID-19 in SSA. At the intrapersonal and interpersonal levels, educating mothers during routine community outreach services, during child welfare clinics, and in church/mosques could be useful. Education and sensitization of male partners could also be an important intervention. At the institutional and community levels, we recommend the allocation of more funds to other essential health services including child health services. The training and deployment of more general nurses, community health nurses/officers, and public health officers is imperative. The provision and adherence to COVID-19 preventive protocols at health facilities are also recommended at these levels. At the public policy level, insurance and tax relief packages for frontline professionals providing child health services and micro-credit facilities at reduced interest rates for women could be implemented towards sustaining the utilisation of child health services.

Subsidizing Interest Rates to Bridge the Racial Wealth Gap

There is a large, persistent, and worsening wealth gap between Black and White households in the United States. Black families’ median and mean wealth is less than 15 percent that of White families (Bhutta et al. 2020). New research shows current monetary policies designed to aid in the economic recovery from the COVID-19 recession will likely exacerbate this wealth gap (Bartscher et al. 2021, 33). This paper proposes issuing a government-subsidized two percent mortgage interest rate reduction for prospective Black homebuyers to provide a financial incentive for Black households to build wealth and to promote integrative behavior among neighborhoods.

Cost of credit and interest rate caps in a covid-19 pandemic situation

For some years now, the government, mainly from the legislature, and a large part of the population have questioned the application of high interest rates to credits granted to lower-income sectors; considering measures such as the cap on interest rates to curb these high rates called usury and charged by financial institutions. The application of measures like this is not a new economic recipe, since many developed and developing countries - such as Peru - carried it out with mostly disastrous results and to the detriment of the sectors that were precisely intended. to attend. In this sense, the theory of the credit market is exposed, the same that in conditions of perfect competition determines the market interest rate. In other words, applying limits to these rates only lead to credit contraction, harming and excluding from the financial system the lower-income sectors, considered those with the highest credit risk. Finally, alternative measures are presented that can lead to the objective of providing the most vulnerable sectors with better interest rates and contributing to their growth. Finally, a good example of interest rate reduction is presented, particularly in a situation of financial and economic crisis with the measure applied by the government and the Central Reserve Bank of Peru -Reactiva Perú-, which allowed the lower income sectors income to enjoy low interest rates at levels never seen before.

Challenges to Accessing Credit Financing from Financial Institutions by the Urban Based Street Vendors: Experience from Dar Es Salaam – Tanzania

This study assessed challenges to accessing credit financing from Financial Institutions by the urban based street vendors in Dar es Salaam - Tanzania and recommends strategies for ensuring effective access to this crucial service. The study utilised mixed methods approach design and data were collected through interview, questionnaire, Focus Group Discussion (FGD), review of secondary data, and observation techniques based on the purposive and random sample size of 104 respondents. The quantitative data were analysed descriptively by using Statistical Packages of Social Science (SPSS) while the Qualitative data were analysed content-wise by using MAXQDA software. Findings show that generally vendors were incapable of sufficiently accessing financial support from the financial institutions due to a number of reasons. These reasons include the vendors’ inability to comply with the established procedures for accessing financial support, lack of financial information relating to when, how and where to acquire the financial service, vendors’ inability to afford collaterals against the credit financing as well as too high loans interest rates. Another one is lack of relevant documents by the vendors required for accessing credit financing. In order to resolve the challenges, the researchers recommended equipping vendors with relevant credit financing information, prioritising provision of group loans to vendors as well as organizing the street vendors into groups. Other strategies to consider would be reduction of loan interest rates by the institutions, eliminating bureaucracy in accessing credit as well as engaging in business policy advocacy in favour of the vendors to access financial support.

How Monetary Policy Affects the Lending and Economic Activity in a Banking System with Excess Liquidity

Abstract Research purpose. The purpose of this paper is to examine the efficiency of the transmission mechanism of the monetary policy in a banking system with excess liquidity. More specifically, it aims to examine how the interest rates of the central bank bills and inflation rate affect total lending and the overall economic activity in the country. For this purpose, the analysis is based on the case of the Republic of North Macedonia, whose banking system has exhibited excess liquidity in the past decade. Design / Methodology / Approach. The paper is based on two different VECM models, analyzing the impact of the central bank bills interest rates and the inflation rate, on lending and real GDP in the Republic of North Macedonia, for the period 2000 – 2019. The analysis also encompasses unit root tests for the variables of interest in order to determine their order of integration and choose appropriate statistical methods. The short-run causality is assessed using the Granger causality test, whereas the existence of the potential long-run relationship is examined using the Johansen cointegration test. In addition, in order to determine the magnitude of the mutual relationship, variance decomposition is employed in both estimated models. Moreover, the stability of the models when exposed to external shocks is observed through their impulse response functions. Findings. Conducted analysis shows the negative long-term impact of the central bank bills interest rates on lending and real GDP in North Macedonia. However, no statistically significant impact in this regard is found in the short run. Opposingly, the inflation rate negatively affects lending and real GDP in North Macedonia in the short run, whereas, in the long run, it does not have a statistically significant impact. Originality / Value / Practical implications. Unlike many other studies in this area, this paper provides practical guidance for the monetary authorities in countries with excess liquidity in the banking system. Namely, its findings imply that central banks should reduce the interbank rate when faced with crises that cause liquidity disparities between banks. Failure to reduce interest rates during the crisis disrupts financial stability, which causes banks to withhold investing their liquid assets in the real economy.

APPLYING MONETARY REGULATION TO CURRENT TRENDS IN SMALL OPEN ECONOMIES

Significant changes in approaches to the monetary regulation of economic stabilization and growth are currently being completed. The processes of change that began under the influence of the global financial crisis have now become inevitable. Determining the main directions of these changes and the possible consequences for small open economies is one of the most important tasks of scientific research. Timely adaptation of national monetary systems in the initial stages of transformation can enable countries to overcome the consequences of the pandemic and make up for lost time. The article analyzes a number of the most characteristic changes in practice and theoretical views on monetary policy. Among them is the change in views on the role and purpose of inflation targeting under the influence of many years of massive emission practices. The identified synchronism of inflation for developed and developing countries gives reason to expect attempts at quantitative easing on the part of developing countries. While they may be postponed due to the acceleration of producer price growth. The tendency to revise the fiscal component in the dualism of fiscal policy to strengthen the targeting of emission is substantiated. The low efficiency of measures of monetary easing and stimulation through the credit channel is noted. The limited impact on the growth of aggregate demand with an increase in the debt burden should lead to a revision of the existing practice of emission and reduction of interest rates. One of the important drivers of changes in monetary regulation is the process of digitalization. Despite certain risks of deficiencies in the effectiveness of central bank monetary policy, the spread of shadow banking, digital currencies and direct lending operations, digitalization is creating new opportunities for financial control and audit. On the basis of the analyzed trends, a conclusion was made about the current tasks of modernization of monetary policy in countries with small open economies, including Ukraine.

Optimal Loan Pricing for Agricultural Supply Chains from a Green Credit Perspective

In recent years, many countries have proposed various sustainable development strategies around environmental issues. The implementation of green supply chain management is an effective sustainable development approach that combines “environmental awareness” and “economic development.” Therefore, introducing the concept of “green” effectively is the main direction for the sustainable development of agriculture in the future. The impacts of green credit policies on agricultural supply chains have rarely been discussed before. Therefore, we focus on the incentive mechanism of green credit policies in the agricultural supply chain. We use the Stackelberg Leadership Model to construct a pricing model which adds the interest subsidy and required reserve ratio (RRR) cuts, and determines the pricing rules of bank loans and production decisions of the farmer in the agricultural supply chain under the incentive policy of green credit by quantifying the optimization problems of the bank and the farmer. The result shows that optimal decisions exist for both farmer and bank in the supply chain game framework. The implementation of the green credit policies contributes to both of their profits. Additionally, the green credit policies give the bank room to reduce interest rates so that the overall utility level of the supply chain could be improved.

Surplus and capital profitability in the Spanish economy, and comparison with the Euro area. A political economy approach

ABSTRACT The article studies the evolution of both surplus and profit rates in the Spanish economy during the phase of the housing bubble, the subsequent crisis and the recent economic recovery (1995─2017), comparing as well core and peripheral economies of the Eurozone. From various methodological approaches and showing several indicators, this paper finds an underlying deep profitability crisis and an alarming drop in what we call the productivity of surplus, without reaching previous levels of profitability at the end of the period. This path has been offset by a reduction in interest rates, which promoted corporate indebtedness. The huge decrease of profitability in Spain is however consistent with its peripheral insertion into the Euro area. In opposition, the more advanced economies of the region were able to keep the level of capital profitability and even increasing the volume of surplus.

Does a sanitary crisis drive oil prices and carbon emissions in the USA? Evidence from VECM modeling.

This study explores the interdependence among a sanitary crisis, environmental degradation, oil prices, and economic activity in the USA based on weekly data over the period from January 03, 2020, to October 02, 2020, through VECM and Granger causality methods. The study period is characterized by lockdowns and mobility restrictions due to COVID-19 pandemic that may affect the economic and energy sector in the USA. Thus, a meticulous analysis of the impact of a sanitary crisis on economic and energy sectors seems to be crucial. Findings are very interesting and confirm the existence of a significant impact of a COVID-19 pandemic on WTI oil price. More importantly, bidirectional causal relations between the three couples: COVID-19 infections–carbon emission, COVID-19 infections–economic growth, and COVID-19 infections–oil price are also discovered. Taken together, our empirical findings are effective for the relevant authorities and policymakers in the USA to develop an appropriate financial and fiscal policy such as reducing interest rates, subsidizing, promoting sustainable industrialization, and carbon taxation to boost investment and to recover the economic growth without harming the environment and complicating the sanitary situation.

АНАЛІЗ СТАНУ КРЕДИТУВАННЯ МАЛОГО ТА СЕРЕДНЬОГО БІЗНЕСУ БАНКІВСЬКИМИ УСТАНОВАМИ УКРАЇНИ В УМОВАХ ПАНДЕМІЇ COVID-19

Access to financial resources, especially through bank lending, is an important factor in the development of small and medium-sized businesses. SMEs need such lending due to lack of own funds, income instability, accelerated movement of working capital, locality of resources and narrow markets. Bank credit occupies a leading position in the formation of financial and investment mechanism for SME development. In the current crisis caused by the coronavirus, banks must ensure maximum access of small and medium-sized businesses to credit resources. With the stabilization of the financial situation and the reduction of interest rates to the level of profitability of SMEs, banks’ interest in their lending will be accompanied by increasing competition in this area of banking business development. The article analyzes the state of lending to small and medium-sized businesses by banking institutions of Ukraine in the context of the coronavirus pandemic Covid-19. It is established that during 2018-2020 there was a declining trend in the bank lending to small and medium-sized businesses due to the negative impact of the pandemic on the activities of small and medium enterprises. The rating of the best conditions for lending to small and medium enterprises by Ukrainian banks in 2021 is analyzed and bank lending programs are considered. It is noted that as a result of the introduction of quarantine in 2020 and other restrictive anti-epidemic measures to prevent the spread of coronavirus, the banking system has changed somewhat. The amount of government assistance to small and medium-sized businesses in a pandemic and the features of the state program of business support “Affordable loans 5-7-9%” are considered.

Characterisation of smallholder resettled sugarcane farmers and their perceptions towards microfinance in Zimbabwe (Chiredzi)

The study sought to characterize smallholder A2 resettled sugarcane farmers and evaluate their perceptions towards microfinance. Data was collected using a questionnaire. Descriptive statistics were used. Results revealed that the majority of farmers solely depend on sugarcane farming. More than 80% of farmers (non-participants) were risk averse while, 90% of the beneficiaries indicated to be risk neutral. More than 90% of the sample farmers subscribe to Sugarcane Farmers Associations. Farmers perceived interest rates, processing and administration charges to be very high. Male farmers dominated their female counterpart and primary education being the highest education level attained by the majority of farmers. Farmers perceived the Estate to be offering better support than the government, MFIs and Farmers Associations in their areas of advocacy. Policy suggestions include gender balance on land allocation; government to be proactive after allocating land. Further recommendations include that MFIs should supplement the disbursed funds with other non-financial services; reduce interest rates, payback period, application procedures and time and increasing grace period.

CURRENT TRENDS IN THE BANKING CREDIT MARKET OF UKRAINE

In recent years, the banking sector of Ukraine has witnessed low lending standards and insufficient protection of creditors' rights. In addition, there were two crises in the country and, as a result, borrowers were unable to repay funds in time. At the same time the quality of loan portfolios deteriorated, therefore more than 50% of all loans became "problematic". Due to the increase in interest rates, most borrowers began to take loans for up to 3 years and in the national currency, because they are less risky. According to statistics, only about 25% of all loans are long-term. In order to encourage borrowers to take long-term loans and borrowings in foreign currency, banking institutions have reduced interest rates on these types of loans, but these actions have given only a slight increase in such loans.

Determinants of Spot and Forward Interest Rates in Brazil in an International Liquidity Scenario: An Econometric Analysis for the Period 2007-2019

Over the last 25 years, Brazil has been among the countries with the highest interest rates globally. High interest rates have been necessary during several recent times, such as in the period from 1997 to 1999, due to the repeated international financial crises that have plagued the country. From 1999, a sustained path of interest rate reduction begun. With the outbreak of the 2008 international financial crisis, the Brazilian monetary authorities promoted a new round of falling domestic interest rates in response to the recessive effects and the threat of a systemic crisis that could hang over the national financial system. In 2012, a set of interventionist nature policies led to a decrease in the Selic rate. Thus, looking at the last 25 years, it appears that many factors have started to influence the trajectory of Brazilian interest rates. In this context, the present work aims to identify, based on empirical research, the determinants of spot and future interest rates. As a methodology, the research uses a multivariate econometric vector autoregressive model (VAR) with error correction (VEC). The analysis covers the years 2017 to 2019, corresponding to the period in the aftermath of the global financial crisis of 2008. The results evidence that both the spot rate and the DI future can be determined by the fluctuations in the level of inflation and by the level of activity and the real exchange rate, in addition to the effects of the lagged variables themselves.

Does investment in palm oil trade alleviate smallholders from poverty in Africa? Investigating profitability from a biodiversity hotspot, Cameroon.

In this study we investigate whether the increasing investment in smallholder oil palm plantations that contributes to deforestation is motivated by financial gains or other factors. We evaluate the financial viability of smallholder farmers selling fresh fruit bunches (FFBs) to intermediaries or agro-industrial companies with mills, or processing the FFBs in artisanal mills to produce palm oil. We use data collected in four oil palm production basins in Cameroon and carried out a life cycle assessment of oil palm cultivation and CPO production to understand financial gains. We use payback period (PBP), internal rate of return (IRR), benefit cost ratio (BCR) and net present value (NPV) for 1 ha of oil palm plantation over 28 years at a base discount rate of 8% to asses viability. Our results show that smallholders make more money processing their FFBs in artisanal mills to produce CPO than selling FFBs to intermediaries or agro-industrial companies with mills. The sensitivity analysis show that land ownership is the single most important parameter in the profitability of investment in palm oil cultivation and trade. In addition to land cost, smallholders suffer from borrowing at high interest rates, high field management costs, while recording low on-farm FFB/processing yields. To improve the financial viability of smallholders investing in oil palm cultivation, measures are needed to encourage them to access land, get loans at reduced interest rates, reduce the cost of field management, adopt good agricultural practices to improve on-farm FFB/processing yields, as well as to generate additional revenue from the sale of other products.

Josiah Child, Interest Rates, and John Locke's “For a General Naturalization”

Throughout the 1690s there were several high-profile parliamentary debates about lowering interest rates from 6 to 4 percent. Locke's involvement in these policy debates is significant. In this period, he circulated at least one important pamphlet on this issue to various Members of Parliament. The purpose of this article is to illuminate the links between Locke's arguments against interest rate reduction and immigration policy. Locke's essay “For a General Naturalization” (1693) employs some of the same pro-naturalization formulations that Josiah Child uses in A New Discourse of Trade (1693), a pamphlet that was ostensibly published in support of the parliamentary proposal for lower interest rates. Even though Locke had a long history with pro-naturalization arguments, the framework of his essay on naturalization is very likely an extension of those debates with Child about interest rates from 1691/2.

The Interest of Being Eligible

AbstractMajor central banks accept nonmarketable assets, such as pooled individual corporate loans, as collateral in their refinancing operations with banks. Such “eligible” loans to firms may provide a liquidity service to the banks which originate them. Banks may in turn pass on a part of this benefit to their borrowers in the form of a reduced interest rate: the eligibility discount. We exploit a surprise extension of the Eurosystem's set of eligible collateral to medium‐quality corporate loans, the Additional Credit Claims (ACC) program of February 2012, to assess the eligibility discount to corporate loans spreads in France. We find that becoming eligible to the Eurosystem's collateral framework translates into a relative reduction in rates by 8 bps for new loans issued to ACC‐eligible firms , controlling for loan‐, firm‐, and bank‐level characteristics. We find that this collateral channel of monetary policy is only active for the banks which have a lower opportunity cost in pledging credit claims and which are well‐capitalized.

Mortgage Lending in January-May 2021: the Upside Risk of the Real Estate Market

At the beginning of this year, the growth rate of residential mortgage lending (RML) corresponded to the average level of 2020. The market situation is largely influenced by the reduction in interest rates caused by the implementation of state preferential mortgage programs. The rise in prices in the primary and secondary housing markets amid more expensive bank funding and an increase in construction costs create potential upside risks in the real estate market and results in a mortgage bubble, which forces the government and the Central Bank of the Russian Federation to take measures to cool the market.

Monetary Policy and Domestic Private Investment in Nigeria

This paper empirically examined the effect of monetary policy on domestic private investment in Nigeria from 1981 to 2018. In other to achieve our objectives, annual time series data of the dependent variable – domestic private investment (DPI) and independent variables – money supply (MS), government domestic debt (GDD), government domestic savings (GDS), interest rate (INT) and consumer price index (CPI) were collected from secondary sources like CBN Statistical Bulletin and WDI. Thereafter, the data were analyzed using descriptive statistics and the econometrics technique of Vector Error Correction Mechanism (ECM) method of analysis. The results of analysis indicated that a long run relationship exists among the variables. Furthermore, the paper revealed that money supply (MS), government domestic savings (GDS). interest rate (INT) and consumer price index (CPI) have a negative and insignificant effect on domestic private investment in the long run but interest rate is significant at 5%, while government domestic debt (GDD), has a positive and insignificant effect on domestic private investment (DPI) in the long run in Nigeria within the period. Based on the above findings, the paper recommends as follows: Expansionary monetary policy should be formulated that will reduce interest rate, encourage borrowings and savings. This will expand commercial banks and other credit granting financial institutions which will encourage real investment in the economy.

Monetary Policy and Personal Income Distribution: A Survey of the Empirical Literature

ABSTRACT The purpose of this paper is to conduct a survey of the recent literature that evaluates, in an empirical way, the distributional impacts of monetary policy. In the first two sessions, we discuss, respectively, the transmission channels of monetary policy to income distribution and the empirical strategies used to measure it. The majority of surveyed papers find that a contractionary monetary policy worsen the income distribution, and that an expansionist policy tends to improve it. Moreover, several papers found that the higher is the redistributive impact of fiscal policy, the lower is the impact of monetary policy on inequality. Another outcome with empirical support is the role of the labor share on total income: the higher is this share, the higher is the impact of monetary policy on inequality. The last point discussed is the asymmetric effects of contractionary and expansionary monetary policy. There is evidence that increases in interest rates have statistically significant effects on income distribution, whereas the effects of reductions in interest rates are not statistically different from zero. This empirical finding goes against the conventional view that the distributional effects of interest rate changes are temporary and likely to net out over the business cycle.