Higher interest rate

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  • This paper investigates whether policy interest rates affect bank risk-taking behavior and banking stability for 14 emerging countries over the period 2000-2014. The empirical findings do not show that lower interest rates increase bank risk taking behavior with presence of risk-taking channel for those emerging countries. Whereas, interest rates do have significant and positive relation with the bank risk-taking behavior because the repayment for borrowers is difficult with higher interest rates.

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  • These daily movements in the Portuguese long-term interest rates could reflect a risk premium. The EC recommendation clearly signalled to markets that Portuguese public finances were facing difficulties. Therefore, markets might have attributed additional risk to the government debt, demanding a higher interest rate to hold the long-term bonds. At the same time, the risk of private bonds might have decreased relatively to government bonds, since this EC recommendation was not seen as directly damaging this segment of the market.

    pdf53p taisaovanchuavo 23-01-2013 49 4   Download

  • A common argument in favor of usury laws is that without them, borrowers would be forced to pay exorbitant interest rates, or at least rates that are unreasonable in relation to the cost of supplying credit. According to economic theory, a competitive market is sufficient to prevent lenders from exercising power over pricing or earning more than a normal return. The price established in a competitive market reflects suppliers' costs of providing the given amount of that good. To be sure, removing a binding usury ceiling will result in higher interest rates.

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  • The findings show that the impact of an IR shock on output and inflation is greater in economies with a higher degree of FI.

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  • The different views presented in the previous section suggest different aspects of how the SGP could affect capital market expectations about future developments, and hence prices for fixed government securities. If a strict interpretation of the SGP reduces budgetary flexibility and short-term growth prospects, it might lead to lower short or medium term interest rates. Conversely, if the central bank considers any breach or lax implementation of the Pact as an indication of an unduly expansionary fiscal policy leading to higher inflation, it could foreclose a monetary easing.

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  • A number of studies (see, for example, Iacoviello (2005) or Calza et al (2009)) apply the nancial accelerator to the housing market, where a similar mechanism is at work. A reduction in interest rates increases the value of collateral (housing) by increasing the discounted value of future user costs. The borrowers' debt capacity and consequently the demand for housing increases further, generating an even larger increase in house prices. Persistence and amplication would be mutually reinforcing and propagate the effect of the initial shock to interest rates on housing activity.

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  • Additionally, this positive association holds for interest-rate options contracts, forward contracts, and futures contracts, suggesting that banks using any form of these contracts, on average, experience significantly higher growth in their C&I loan portfolios. Furthermore, C&I loan growth is positively related to capital ratio and negatively related to C&I loan charge-offs. The findings in this study are confirmed after a robustness check.

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  • The other extreme is “monetary dominance”. Central banks raise interest rates to avoid the inflationary effects of excessive budget deficits. Real interest rates rise across the maturity spectrum and the prospect of higher-and-higher debt service costs then forces governments to reduce their primary deficits. This seems to fit the UK story in the late 1980s and early 1990s when tighter macroeconomic policies (monetary and fiscal) brought down inflation. But it took many years for this policy stance to earn credibility and reduce long-term interest rates (see panel C of Graph 3).

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  • This interest rate configuration also has implications for households deciding on the maturity of their mortgage financing. When short-term rates are low and deemed unlikely to rise, households shorten the maturity of their borrowing, often counting on being able to switch to long-term mortgages when they feel interest rates may rise. As households switch, banks dependent on short-term funding have to hedge their new interest rate exposures.

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  • First, it is worth remembering that the reduction in reserve demand is in large part the result of the failure of reserves to pay interest. The incentive to economize on reserves was greater when inflation made nominal interest rates much higher than they are today. But even at current interest rates, banks continue to find ways to avoid holding reserves. 13 A falling demand for reserves is far from inevitable if the opportunity cost of holding reserve balances at a central bank is reduced by achieving price stability or by paying interest on reserves.

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  • Answering the question of why Brazil has relatively high real interest rates cannot be done in isolation by focusing exclusively on Brazilian data. Doing so would lead us to conclude that Brazilian real interest rates are actually very low at the moment. We are interested not only in why interest rates have declined but why, at any point in time, they were considerably higher than in other countries and what factors may help Brazil converge to the level of other emerging markets. To this end, the analysis in this paper is based on a panel data set of 15 emerging...

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  • These routes to increased demand, through lower interest rates, provide clear mechanisms through which a fiscal adjustment can be expansionary. If the increase in demand from an improved trade position, combined with increased investment and consumption, exceeds the falloff in demand that results from a combination of tax increases and spending cuts, then the fiscal adjustment can be expansionary. Whether in practice it is expansionary depends on the relative size of these effects. Of course, lower interest rates are a key part of the story.

    pdf15p loginnhanh 22-04-2013 41 2   Download

  • Investment-grade bonds are issued by well-regarded companies and rated as desirable investments.To be considered investment- grade, a bond must be rated BBB or better by Standard & Poor’s, or Baa or better by Moody’s. Corporate bonds with a lower rating or no rating are sometimes called high-yield bonds because of the higher interest rates they must pay to attract investors.They are also sometimes referred to as “junk bonds” because the issuers are believed more likely to default—that is, to fail to make full interest and principal payments as scheduled....

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  • Our results suggest that both monetary policy and capital inows shocks have a signicant and positive effect on house prices, credit to the private sector and residential investment. The effects of both shocks are greater in countries with a higher degree of mortgage market development, with the effect of monetary policy shocks roughly doubling. This suggests that excessive nancial innovation may act as a propagation mechanism. The existence of mortgage-backed securities has a much larger effect on the transmission of capital inows shocks.

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  • Overall, our analysis can be understood as one of the first cross-country empirical studies on the determinants of bank fees and as a contribution to the literature testing the contradictory empirical predictions of the SCP and ES hypotheses regarding the influence of concentration on prices in the banking industry.

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  • Our stylized model generates several empirical hypotheses about the insurance offer decision. Firms in industries where labor turnover rates are high do not tend to offer insurance. Premium rigidities will be most pronounced in such industries. Firms not offering insurance will tend to have lower health-cost variability and lower average expected health spending than firms offering insurance; for example, they have higher proportions of younger workers or are in industries where workers tend to be healthy.

    pdf21p quaivatxanh 29-11-2012 51 5   Download

  • All else being equal, a bond fund with a longer average maturity or average duration will usually generate higher interest income than one with a shorter average maturity or duration.This basic relationship holds true because longer-term bonds must pay higher interest rates than shorter-term bonds to compensate for the risk that future events (such as rising interest rates or inflation) will erode the bond investment’s value.

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  • 1 Generally speaking, the better your credit, the lower the cost of obtaining that credit, usually in the form of interest rates and fees. That means, you’ll have more available for savings and spending. Lenders will have more confidence in your ability and commitment to repay the loan on time and in full. Conversely, if your credit history is not strong, you’ll probably pay higher interest rates and fees and have less money available for savings and spending. You could end up being short on money and playing “catch-up,” juggling between payments on several bills.

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  • Together, the empirical facts established in this paper suggest that capital regulation and buffers may only be of second order importance in determining the capital structure of most banks. Hence, our paper sheds new light on the debate whether regulation or market forces determine banks’ capital structures. Barth et al. (2005), Berger et al. (2008) and Brewer et al. (2008) observe that the levels of bank capital are much higher than the regulatory minimum. This could be explained by banks holding capital buffers in excess of the regulatory minimum.

    pdf40p enterroi 02-02-2013 46 5   Download

  • As seen in Table 7, both Planned Parenthood and other WHP clinics typically offer a comprehensive range of contraceptive methods. The methods include oral contraceptives (the Pill) as well as long-acting reversible contraceptives (LARCs) such as intrauterine devices (IUDs), implants (e.g., Implanon), or injectables (e.g., Depo-Provera). LARCs are particularly important because they are the most effective in preventing unintended pregnancies and have lower failure rates.

    pdf12p connicquy 20-12-2012 24 4   Download



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