Economics Commons^™

Effectiveness Of Interest Rate Policy On The Management Of Macroeconomic Stability: Evidence From The United Kingdom, Mostafa Aboelsoud

Economics

This study examines the dynamic relationship between the London Interbank Offered Rate (LIBOR), the inflation rate, the unemployment rate and economic growth in the context of the UK, for the period 1992: Q1 to 2016: Q4. The study aims to evaluate the impact of the LIBOR on the management of macroeconomic stability in the UK during the period under review. The study employs a vector autoregressive (VAR) model to examine the dynamic relationship between interest rates, unemployment and GDP. A co-integration test evaluates the long-run relationship between these variables, and the VAR Granger-causality tests the direction of causation among the …

The Dynamic Interrelationship Between Interest Rate And Macroeconomic Policy Objectives: Case Of The United Kingdom, Mostafa Aboelsoud, Dimitrios Paparas, Azzouz Zouaoui, Mustafa Kasim

Economics

The objective of this study is to provide empirical evidence on the short- and long-run relationships between the short-term interest rate, London interbank offered rate (LIBOR) and macroeconomic policy objectives, such as price stability, economic growth, and stability of the exchange rate market. For this purpose, we deploy quarterly frequency data from the United Kingdom between 2000 and 2015 and adopt a multiple regression model.

Furthermore, this study uses the Johansen, Stock-Watson cointegration test and the Granger Causality test in order to examine the dynamic short- and long-run relationships among LIBOR, the consumer price index as a proxy of price …

International Reserves And Global Interest Rates, Gonçalo Pina

Economics

In this paper we study the relationship between foreign currency international reserve holdings and global interest rates. To guide empirical work we solve a simple, small open-economy model with money, where the central bank manages international reserves to smooth inflation over time. This model shows that changes in interest rates are positively related to the target level of reserves. As a consequence interest rate hikes increase reserve transfers, defined as the change in international reserves net of the interest earned on reserves. Using quarterly data for 75 countries between 2000 and 2013, we document a positive relationship between interest-rate changes …

The Recent Growth Of International Reserves In Developing Economies: A Monetary Perspective, Gonçalo Pina

Economics

The massive accumulation of international reserves in developing economies is a puzzling recent development in the world economy. This paper studies reserve accumulation as the outcome of a simple model in which the central bank smooths inflation. I explore the view that central banks accumulate reserves to face large fiscal shocks that need monetary financing. Central bank revenues are obtained through inflation, but inflation is distortionary. As a result, the central bank optimally accumulates international reserves in order to spread the costs associated with inflation over time. A simple numerical exercise for an average developing economy using data between 1970 …

On Some Subtle Implications Of The Choice Of Numeraire For Monetary Policy In Developing Countries, Eduardo Zambrano

Economics

Numeraire choice is often deemed a problem of purely analytical convenience. In this paper I show that there is more to numeraire selection than meets the eye for the formulation of monetary policy in countries with weak fiscal institutions. I show how (a) improper numeraire choice can dramatically overstate or understate Central Bank profits and (b) how this can threaten the ability of a Central Bank to keep inflation under control. I show point (a) in the context of Monte Carlo experiments calibrated for the Venezuelan economy and point (b) in an infinitely lived representative agent model that illustrates the …