Questions tagged [interest-rate]

The proportion of an amount loaned which a lender charges as interest to the borrower, normally expressed as an annual percentage. The interest rate is typically determined by a combination of market forces and monetary policy.

Filter by
Sorted by
Tagged with
2 votes
0 answers
28 views

How do mortgage lenders set interest rates?

I'm trying to understand the factors that determine the interest rates that mortgage lenders offer borrowers. My understanding is that rates are determined based on the lender's cost of funds and the ...
user avatar
0 votes
1 answer
20 views

Is is possible that two economies have the same real interest rate, same GDP growth, but different inflations?

This is just a conceptual thought experiment. Is it possible that two countries have the same real interest rate, same GDP growth, but different inflation, one higher, one lower? If that's possible, ...
user avatar
0 votes
0 answers
116 views

Can a recession caused by drastic increases in the official interest rates be good for the economy in the long run?

Most of you are probably aware that a lot of the countries are increasing their official interest rates in order to fight inflation. Interest is an expense for the companies and individuals, thus an ...
user avatar
  • 315
0 votes
1 answer
46 views

Why does the dollar seem weak?

2:00 (GMT+8) - The FED raised interest rates at 0.75-percentage-point (75 basis points I believe, not sure with terminology but definitely now at 1.75%). But even so, why does the USD seem weaker? I ...
user avatar
1 vote
1 answer
39 views

Chain effects when Money Demand is greater than Money Supply

Here is an example graph of Money Market Equilibrium The chain effects when interest rate is 8% are : Excess Demand for Money => So, People would sell Bonds => Bond Prices goes Down => ...
user avatar
2 votes
3 answers
82 views

Is supply-caused inflation different from demand-caused inflation

I've heard numerous times that the current inflation problem is caused by supply-side issues including supply chain disruption, lower productivity from fewer people working, impacts from trade ...
user avatar
0 votes
1 answer
15 views

The Fed's repo amount and TGCR shows positive pearson correlation. How so?

If I understand correctly, repo (https://fred.stlouisfed.org/series/RPONTSYD#0) → easier to borrow and the interest rate decreases → Tri-Party General Collateral Rate (TGCR) decreases → monetary ...
user avatar
  • 1
-4 votes
1 answer
111 views

Why is there increased speculation that America might go into a recession ? If they do will the rest of the world also face downturn?

Recently there has been increasing speculation regarding USA going into recession (since rate hikes can cause recessions): https://www.washingtonpost.com/business/2022/05/19/recession-economy-markets/ ...
user avatar
-1 votes
1 answer
41 views

How does buying bonds decrease interest rate?

I am trying to understand how interest rates are influenced by central banks purchasing government bonds. When Googling "how does buying bonds increase interest rate" I find the following: ...
user avatar
  • 165
1 vote
1 answer
57 views

Savings = Investment. High interest rates stifle investment. High interest rate encourage savings. Isn't this a contradiction?

If savings = investment, then by definition, higher interest rates encourage savings and hence more investment. But when it comes to monetary policy, central banks increase interest rates in order to ...
user avatar
  • 161
1 vote
0 answers
38 views

Market price of interest rate risk under the CIR model

My goal is to find the market price of risk associated with the interest rate under the CIR model whose stochastic differential equation under the physical measure is given: \begin{eqnarray}\label{...
user avatar
0 votes
0 answers
8 views

Interest rate increase and levered portfolio rebalancing

Joseph Wang (“Fed Guy”) in the following podcast gives the following argument to question whether the markets can handle the Fed hiking to 3-4%: What happens if you are a high levered fund and you ...
user avatar
0 votes
0 answers
26 views

How much of Australian inflation is demand driven or supply driven?

For the Aussies who have been keeping track with the current inflation rate at 5.1% we have seen the policy response by the RBA increasing the cash rate by 25 basis points so its now at 0.35%. This is ...
user avatar
1 vote
0 answers
23 views

Inverse relationship of deposit volume to deposit rate and exchange rate of deposit currency

I have data on short-term (2 months) deposits, which show an inverse relationship between the volume of deposit replenishment to the deposit rate and the exchange rate of the deposit currency. We can ...
user avatar
0 votes
0 answers
9 views

How would an Income Tax Cut affect Money Supply and/or Money Demand in a Country in a Recession with Falling Price Levels

How would an Income Tax Cut affect Money Supply and/or Money Demand in a Country in a Recession with Falling Price Levels. How would Interest Rates be affected and what affects would the change in ...
user avatar
0 votes
0 answers
18 views

progressive interest rate

I have a product for which the fee is dependent on the proportion of the total that is purchased. The function is Rate = Rate + Withdrawn Capital / Total Capital in ...
user avatar
1 vote
0 answers
17 views

Why don't both Supply and Demand Curve Shift in Loanable Funds Market in Case of Gov't Deficit/Surplus?

Here it is written: But that doesn’t mean both curves shift? Supply and demand do not have the same determinants in any market. Your graphical model should reflect only one point of view. I don't ...
user avatar
1 vote
0 answers
26 views

Is the following information related to interest rates, and the Federal Reserve accurate?

There are actually two interest rates that are directly affected by the Fed. The Federal Funds Rate is the interest rate banks charge other banks who borrow funds to meet reserve requirements. If that ...
user avatar
0 votes
0 answers
29 views

Does the Fed Change the Discount Rate in Monetary Policy?

Here, it's given that: The first tool used by the Fed, as well as central banks around the world, is the manipulation of short-term interest rates. Put simply, this practice involves raising/lowering ...
user avatar
1 vote
1 answer
61 views

What is interest rates generally in Macroeconomics?

In Macroeconomics courses, the term 'interest rates' is often used without disambiguation between whether the interest rates if of the rate given in bank savings account / bonds or whether the rate is ...
user avatar
1 vote
1 answer
35 views

Why has the market got it so consistently wrong about interest rate rises

I have seen this graph (or similar) in several places. It shows how the market has consistently and incorrectly predicted interest rates will rise back to normal levels. With the benefit of hindsight, ...
user avatar
  • 1,001
1 vote
0 answers
44 views

Impact of contractionary monetary policy and IS-LM curve shifts

Using the IS-LM diagram, show the impact of a contractionary monetary policy for a country when: (a) it does not affect expectations about future interest rates and output (b) it affects expectations ...
user avatar
  • 131
2 votes
2 answers
242 views

Loans that don't have to be paid back (only the interest)

A normal loan has to be paid back with interest. Every now and then there are interest-free loans where only the loan has to be paid back but no interest, e.g. among relatives or friends, but also as ...
user avatar
0 votes
0 answers
24 views

How does R-policy affect bearish market?

I would like to ask what will happen if the central bank decides to adopt R-policy for three different scenarios: Loss of consumer confidence - i.e., consumer pessimism Loss of investor confidence - ...
user avatar
0 votes
0 answers
20 views

Interest and Installment

Suppose that a sum of x (in dollars) is being repaid by n equal yearly installments at a fixed yearly ...
user avatar
  • 111
1 vote
1 answer
63 views

The Fed and Raising Interest Rates

Recently the Federal Reserve raised interest rates by 0.25%. It seems to me that in the modern era there is no reason to pick a round number like 0.25%. It also seems to me that they could / should ...
user avatar
  • 113
2 votes
1 answer
24 views

What is federal reserve interest rate?

This is part of an article: the causes are not the same and the Federal Reserve Bank may not achieve the desired results by increasing interest rates, What does it mean? What interest rates can ...
user avatar
0 votes
1 answer
9 views

National consumption regression with inflation and interest rate controls

I'm trying to test the relationship (only in cross-section - not with time series data) between national consumption and the fragile state index and my project advisor suggested I include inflation ...
user avatar
  • 309
0 votes
3 answers
65 views

Are fixed rate mortgages better in periods of low interest?

Conventional wisdom is to lock in a low rate (by getting a fixed-rate mortgage instead of ARM) while we're in a period of historically low interest rates. Assuming that you are going to own a house ...
user avatar
  • 377
3 votes
1 answer
60 views

What is the specific aim of the Russian Central Bank's decision to hike key interest rate during the Ukraine invasion?

The Russian Central Bank raised their key interest rate to 20% in the midst of economic sanctions in response to the invasion of Ukraine. In the United States, the key interest rate, as far as I ...
user avatar
  • 163
0 votes
0 answers
38 views

Will the freezing of Russia's foreign exchange reserves force China to decrease its massive Western currency reserves?

China has build up a massive foreign exchange reserve (excluding gold) of 3.2 trillion USD (FRED, Nov 2021). By the end of 2014, 58% of this were held in US dollars, according China's State ...
user avatar
  • 115
1 vote
1 answer
59 views

How much money is, on average, "on loan" from the Fed?

The Fed maintains its target interest rates by "lending" money to commercial banks: When the actual federal funds rate is higher than the target, the Federal Reserve Bank of New York will ...
user avatar
  • 509
0 votes
1 answer
34 views

What are the standard models of monetary theory?

I am currently conducting research on a digital economy which has recently faced inflation issues and thus implemented monetary policy to tackle them. My paper seeks to compare how real life digital ...
user avatar
0 votes
2 answers
65 views

Is there a scenario where investment and interest rates could both be increasing

Is there a scenario where investment and interest rates could both be increasing? I know that lower interest rates lead to increase borrowing and thus increased investment spending. So there is ...
user avatar
  • 1
3 votes
1 answer
180 views

Steady-state savings rate

I'm having trouble with the steady-state savings rate type of problems. Here is the problem I'm stuck on: The production is $Y = 0.5*K^{1/3}(AN)^{2/3}$. If savings is $s$%, what are the steady-state ...
user avatar
0 votes
2 answers
56 views

Are there people taking variable loans with low interests rate?

When you are taking a loan your bank will give you to option to have a variable or fixed loan. A variable loan means that you'll have to pay back the parts of your loan with the interest percentage ...
user avatar
  • 165
1 vote
1 answer
39 views

Global saving glut and the the level of interest rates

It is widely discussed that the "global saving glut" increases global money supply and so reduces it's price (interest rates) and pushes up the asset prices. It sounds very logical. However, ...
user avatar
1 vote
0 answers
15 views

Data on historical, cross-country nominal and real yield curves

Various central banks publish their fitted nominal yield curve estimates: the Fed, BOE, SNB, BOC, ECB (cf: Bundesbank), RBA, Russia, RBI. (I couldn't find for BOJ; Brazil; BOK; or PBOC. Links for ...
user avatar
  • 111
0 votes
2 answers
31 views

What are the consequences of an increase in interest rates for States?

As the inflation is high, central banks such as the FED and the ECB are about to raise their rates. One of the consequence is that the stock market is falling and in particular companies having a lot ...
user avatar
  • 101
1 vote
0 answers
31 views

Why did Greenspan think rate hikes would increase treasury term premiums?

Greenspan once called long-term treasury yield's continued downtrend despite his multiple rate hikes a "conundrum." The Fed has research on what is often called "Greenspan's Bond Yield ...
user avatar
1 vote
1 answer
78 views

Simple description of how interest impacts inflation

I always was taught that inflation is impacted by interest like so: Lower interest rate => Loaning money is cheaper => More money in the system => Higher inflation However recently I am ...
user avatar
0 votes
1 answer
17 views

Why is return same as interest rate (yield) in the expectations theory?

My book (Financial Markets and Institutions, Mishkin et al.) treats returns and interest rates as the same thing while explaining the expectations theory in Chapter 5. However, in the previous chapter ...
user avatar
3 votes
4 answers
383 views

Who controls money supply if the fed does not?

This whitepaper states (bold mine): According to the consensus view, the two leading culprits of inflation risk today are the fiscal deficit and the money supply. To illustrate, take this CNBC ...
user avatar
  • 133
1 vote
0 answers
59 views

How to calculate time preference?

Since I'm doing some research on interest rates and their determinants I've coming to read some "austrian" things about the rate of time preference. In order to investigate further about the ...
user avatar
  • 105
29 votes
6 answers
6k views

Why is a stock market crash so bad?

Many folks speak about potential stock market crashes when central banks raise interest rates. I am not a graduate economist nor do I pretend to understand it, but I am definitely curious about what'...
user avatar
  • 415
0 votes
0 answers
22 views

Forward Guidance affects interest rate?

Forward guidance affects the effective federal funds rate, right? as opposed to the overnight reverse repurchase/overnight loans, longer-term interest rates, or discount rate of loans from the Fed to ...
user avatar
0 votes
2 answers
90 views

How interest payment work in lending under bitcoin standard?

In Fiat Standard lending creates money. Whenever the debt is fully paid the monetary supply increases. What happens under bitcoin standard? Assume all the bitcoin has been mined and BTC has become the ...
user avatar
  • 117
1 vote
1 answer
44 views

What causes rate transmission to be slow?

A recent quote from David Rosenburg on rate hike expectations reads: Remember, everything the Fed does in a moment of time has a peak impact on the economy 12 to 18 months later. Thus, raising rates ...
user avatar
0 votes
0 answers
38 views

Why do we have *daily* series of T-bill yields?

I understand that each week the US Treasury issues new T-bills at different maturities (1-month, 3-months, 1-year, etc). As far as I understand, this issuance happens every Tuesday. After the auction, ...
user avatar
3 votes
1 answer
60 views

Why would a country ever want high interest rates?

The way I understand it, the government of a country can do a lot to change the interest rate in their country. Low interest rates encourage taking out loans and spending, thus boosting the economy, ...
user avatar
  • 131

1
2 3 4 5
9