Interest rate

About: Interest rate is a research topic. Over the lifetime, 47087 publications have been published within this topic receiving 1075654 citations. The topic is also known as: key interest rate.

On the pricing of corporate debt: the risk structure of interest rates

Abstract: Presented at the American Finance Association Meeting, New York, December 1973.(This abstract was borrowed from another version of this item.)

Money and capital in economic development

Abstract: This books presents a theory of economic development very different from the "stages of growth" hypothesis or strategies emphasizing foreign aid, trade, or regional association. Leaving these aside, the author breaks new ground by focusing on the use of domestic capital markets to stimulate economic performance. He suggests a "bootstrap" approach in which successful development would depend largely on policy choices made by national authorities in the developing countries themselves.Central to his theory is the freeing of domestic financial markets to allow interest rates to reflect the true scarcity of capital in a developing economy. His analysis leads to a critique of prevailing monetary theory and to a new view of the relation between money and physical capitala view with policy implications for governments striving to overcome the vicious circle of inflation and stagnation. Examining the performance of South Korea, Taiwan, Brazil, and other countries, the author suggests that their success or failure has depended primarily on steps taken in the monetary sector. He concludes that monetary reform should take precedence over other development measures, such as tariff and tax reform or the encouragement of foreign capital investment. In addition to challenging much of the conventional wisdom of development, the author's revision of accepted monetary theory may be relevant for mature economies that face monetary problems."

Expectations and Exchange Rate Dynamics

Abstract: The paper develops a theory of exchange rate movements under perfect capital mobility, a slow adjustment of goods markets relative to asset markets, and consistent expectations. The perfect foresight path is derived and it is shown that along that path a monetary expansion causes the exchange rate to depreciate. An initial overshooting of exchange rates is shown to derive from the differential adjustment speed of markets. The magnitude and persistence of the overshooting is developed in terms of the structural parameters of the model. To the extent that output responds to a monetary expansion in the short run, this acts as a dampening effect on exchange depreciation and may, in fact, lead to an increase in interest rates.

Monetary policy rules and macroeconomic stability: Evidence and some theory

Abstract: We estimate a forward-looking monetary policy reaction function for the postwar United States economy, before and after Volcker’s appointment as Fed Chairman in 1979. Our results point to substantial differences in the estimated rule across periods. In particular, interest rate policy in the Volcker-Greenspan period appears to have been much more sensitive to changes in expected ineation than in the pre-Volcker period. We then compare some of the implications of the estimated rules for the equilibrium properties of ineation and output, using a simple macroeconomic model, and show that the Volcker-Greenspan rule is stabilizing.