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We study interest rates transmission to savings at low and negative rates. Exploiting cohorts of consumers from a data-rich multi-country survey, we show how the strength of interest rate transmission to savings varies with the level of nominal interest rates. This response is positive when interest rates are high but declines steadily at lower levels. At very low levels, there is evidence that the savings response may even reverse sign. Such a "savings' reversal" is consistent with the behavioural evidence on money illusion as well as with a negative signalling effect from policy announcements in a liquidity trap and may weaken the direct stimulatory effects from very low and negative rates. Consistent with this, the reversal appears to be causally related to central bank information shocks and concentrated among older consumers and consumers with lower educational attainment.

This paper investigates the impact of exchange rate movement and the nominal interest rate on inflation in Ghana. It also looks at the presence of the Fisher Effect and the International Fisher Effect scenarios. It makes use of an autoregressive distributed lag model and an unrestricted error correction model. Ordinary Least Squares regression methods were also employed to determine the presence of the Fischer Effect and the International Fisher Effect. The results from the study show that in the short run a percentage point increase in the level of depreciation of the Ghana cedi leads to an increase in the rate of inflation by 0.20%. A percentage point increase in the level of nominal interest rates however results in a decrease in inflation by 0.98%. Inflation increases by 1.33% for every percentage point increase in the nominal interest rate in the long run. An increase in inflation on the other hand increases the nominal interest rate by 0.51% which demonstrates the partial Fisher effect. A 1% increase in the interest rate differential leads to a depreciation of the Ghana cedi by approximately 1% which indicates the full International Fisher effect.

After 2005, commodity prices experienced their longest and broadest boom since World War II. Agricultural prices have now come down considerably since their 2011 peak, but are still 40 percent higher in real terms than their 2000 lows. This paper briefly addresses the main arguments on the causes of the agricultural price cycle. It broadens the scope of analysis by focusing on six agricultural commodities, and identifies the relative weights of key quantifiable drivers of their prices. It concludes that increases in real income negatively affect real agricultural prices, as predicted by Engel's Law. Energy prices matter most (not surprisingly, given the energy-intensive nature of agriculture), followed by stock-to-use ratios and, to a lesser extent, exchange rate movements. The cost of capital affects prices only marginally, probably because it not only influences demand, but also evokes a supply response.

Recent research suggests that management of the public sector debt can have important effects on a country macroeconomic performance. This Public debt management and macroeconomic stability article provides an overview of the factors that the recent literature has identified as important in determining the optimal composition of the public debt. Based on this analysis, it attempts to establish general guidelines for public debt management in emerging economies. To retain market access and promote domestic financial market development, governments should generally finance themselves at market rates using a wide variety of securities. Beyond this general principle, the optimal composition of the public debt involves a tradeoff between enhancing the government anti-inflationary credibility and reducing the vulnerability of its budget to macroeconomic shocks. Consequently, the optimal composition of the debt depends on a country circumstances. Debt should be heavily weighted toward long-term nominal securities for governments that have anti-inflationary credibility and toward long-term indexed debt for those that do not.

The paper examines the transmission mechanism of monetary policy in an open economy with and without a binding zero bound on nominal interest rates. In particular, a foolproof way of escaping from a liquidity trap is suggested, consisting of a price-level target path, a devaluation of the currency and a temporary exchange rate peg, which is later abandoned in favour of price-level or inflation targeting when the price-level target has been reached. This will jump-start the economy and escape deflation by a real depreciation of the domestic currency, a lower long real interest rate, and increased inflation expectations. The abandonment of the exchange-rate peg and the shift to price-level or inflation targeting will avoid the risk of overheating. Some conclusions for Japan are included.

Because agriculture is the economic backbone of most countries in Sub-Saharan Africa, including Ethiopia, any meaningful sustainable development program in the continent must therefore be anchored in the sector. The concept for this study on agribusiness indicators was based on the vital role that agribusiness plays in agricultural development. The study focuses on agribusiness indicators (ABI) to identify and isolate the determining factors that lead private investors and other stakeholders to participate in agribusiness and to engage in discourse regarding its development. A more thorough empirical understanding of these determinants in turn can usefully inform the types of policy reforms that can promote agribusiness in Africa. In Ethiopia, the ABI team focused on the following success factors: a) access to critical factors of production of certified hybrid seeds, fertilizer, and mechanical input; b) enabling environment in terms of access of credit and transportation; and c) government expenditures on agriculture, and trade and regulatory policies that currently influence the agribusiness environment. The factors and indicators that the research team has included in this study are not exhaustive but rather are intended to serve as a pilot that could be scaled up to include more variables and countries. The findings of the study revealed the dominant role of the government in the seed and fertilizer markets. In the seed sub-sector, perennial shortages of both basic and certified seeds have greatly limited agricultural productivity in Ethiopia.

The economic rebound in recent quarters has been stronger than expected and the economy is showing signs of overheating. These signs are show up in rising inflation, especially of those goods and services which are in strong demand, but cannot easily be imported or whose local supply cannot readily be increased to meet the growing demand. Gross Domestic Product (GDP) growth reached 20.8 percent year-on-year (yoy) in Q3, following an outturn of 17.3 percent in Q2. Growth for the year as a whole will likely hit 15 percent, if not more, up from 6.4 percent in 2010, and is being pushed by infrastructure spending as Mongolia develops its vast mineral wealth. Inflation continues its upward trend. The trade deficit is close to record levels (US$ 1.4 bn in September using 12-month rolling sums) driven by a surge in mining-related equipment and fuel imports. Exports are growing strongly too, driven by large coal shipments to China. The 2012 budget continues this fiscal expansion and targets a 74 percent increase in expenditures (mostly on wages and social transfers).

The Mongolian economy is experiencing rapid growth in 2011 the second quarter saw the economy growing at a whopping 17.3 percent year on year, compared to 9.9 percent in the first quarter. Transportation and construction grew at 39.9 percent and 38.4 percent, respectively, while retail and wholesale trade grew at 24.7 percent, with Mongolians spending more on consumption as a result of higher incomes. The mining and manufacturing sectors recorded respectable growth rates of 8.3 and 12.9 percent yoy in the second quarter, respectively. Reflecting the higher growth, unemployment declined from 13 percent in December 2010 to 8.7 percent in June. Informal labor markets for unskilled workers are also booming, with real wages nearly doubling between December 2010 and June 2011. Mongolia's economic outlook depends heavily on global macroeconomic factors: the current uncertainty and poor growth prospects for the global economy are cause for concern. If there is another global recession, Mongolia's small, open economy will be affected. In that case, China's policy reaction will be crucial for Mongolia.

The economy continues to recover with most sectors rebounding strongly from the sharp drop in output late 2008 and early 2009. Preliminary estimates suggest that real Gross Domestic Product (GDP) grew by 6.1 percent year-on-year in 2010, following an outturn of minus 1.3 percent in 2009. However, winter arrived in Mongolia with the agriculture sector still feeling the impact from last year's dzud. The sector has now experienced double-digit contractions for the third quarter in a row. The exchange rate against the US dollar has been slowly appreciating back to the pre-crisis level. In December 2010, the average monthly exchange rate against the US$ appreciated by 3.0 percent, compared to the previous month, or 15 percent compared to December 2009. The latest survey conducted in informal labor markets in December 2010 revealed a reduction in number of casual workers by about 40 percent compared to September due to the seasonal closure of construction labor markets, and reduced outdoor sales activities due to cold weather. Mongolia has made significant progress in improving budget transparency, but there is still considerable room for improvement. Finally, although Mongolia's laws are easily accessible online and court processes are generally impartial and transparent, the predictability of court decisions is limited and the courts, enforcement and registration agencies are often perceived as corrupt by the public.

This paper, first, reviews briefly the literature on the term structure of interest rates, citing some of the most important studies done on the topic for the Mexican case in the last years. In addition, the development of the government debt market is described. Second, evidence against the expectation hypothesis is shown and the deviations of the term structure from this hypothesis are examined. Third, it is documented that much of the variability of the term structure is due to changes in its level. Fourth, some of the statistics of the term structure are associated with macroeconomic variables, specifically the shortterm rate and the output gap as measured with the IGAE index. Regarding this last point, evidence is found that changes in the term structure of interest rates' slope are associated with the monetary policy stand along the business cycle. The nominal interest rates used in the analysis go from July 2002 to June 2011.

Many countries in the Latin America and the Caribbean (LAC) region, especially in South America, fared well during the global crisis and are now on a strong growth path. The region s recession in 2009 was relatively short lived and, with the notable exception of Mexico, remarkably mild. The current pace of economic recovery is exceeding expectations, with gross domestic product (GDP) projected to grow in the 5-6 percent range in 2010. This report discusses LAC's newfound resilience in the midst of financial globalization, examining key features of the cyclical behavior of LAC economies in comparison to other emerging economies and to its own past. Resilience is defined throughout this report in a broad sense to denote the ability of an economy to navigate with minimum disturbances through shocks, cushioning their negative spillovers in bad times, and recovering fast after a downturn. The report is structured as follows: first, it evaluates the relative performance of LAC countries during the contractionary period generated by the recent global crisis, to shed light on LAC's ability to shield its economies or soften the blow of a large external shock. Second, a similar exercise is conducted for the recovery phase of the cycle, when in the aftermath of an external shock more resilient countries will be expected to have a faster and more robust recovery. Third, it takes a deeper look at the different driving forces behind the recovery, including the role of domestic demand, commodity prices, and the connection to emerging Asia. Fourth, it provides evidence of the ability of different countries in LAC to conduct counter-cyclical policies in response to the global financial crisis. Lastly, a concluding section warns about the main macro-financial tensions and challenges lying ahead for the region.

This paper provides an extensive case study of the Turkish automotive and the consumer electronics industries. Despite a macroeconomic environment that inhibits investment and growth, both industries have achieved remarkable output and productivity growth since the early 1990s. Although there are similarities between the performances of the two industries, there are significant differences between their structures, links with domestic suppliers, technological orientation, and modes of integration with the global economy. The automobile industry is dominated by multinational companies, has a strong domestic supplier base, and has seized the opportunities opened up by the Customs Union by investing in new product and process technology and learning. The consumer electronics industry is dominated by a few, large, domestic firms, and has become competitive in the European market thanks to its geographical proximity, productive domestic labor, and focus on a protected and technologically mature segment of the market, which also helps explain the recent decline in industry's fortunes. These industries could have performed even better had more responsive macroeconomic policies been adopted. It is certain that governments could be more responsive only if far-reaching political/institutional reforms are undertaken by changing the constitution and current political party and election laws in order to establish public control over the political elites.

This study explores the inter relationships between the nominal interest rates of Australia and its principal trading partners. The analysis focus on the short end of the yield curve --specifically, rates of up to one year to maturity. In essence, the study comprises a suite of essays, which together provide an overall understanding of the relevant relationship that is, in both depth and scope, greater than the sum of the individual essays. The inquiry begins with an investigation of the impact of the overnight information content of international interest rates upon the Australian domestic money market. The results indicate that the strongest information impact on Australian interest rates is from the overnight interest and exchange rates of the United States. This is followed, in the second essay, by an investigation of the relationship between domestically and internationally traded Australian dollar denominated, financial assets. The results indicate that a Euro-Australian dollar inter-bank deposit and Australian bank accepted bills are effectively the same assets. Based on this result the third essay investigates the extent to which the short-term nominal interest rates of Australia, the United Kingdom, the United States and Japan are consistent with the expectations theory of the interest rate term structure. The results indicate that nominal inter-bank deposit rates in all four currencies are broadly consistent with the expectations theory. In addition, two common stochastic trends are identified, which can be associated with the markets of the United States and Japan. The forth essay focuses on the bilateral relationships between the nominal interest rates of Australia, the United States, the United Kingdom and Japan, and aims at establishing the extent to which the observed data is consistent with interest rate parity conditions. It was found that, in the long run, and with some exceptions, there is strong support for all three of the usual parity conditions. These relationships are interpreted as a measure of the efficiency with which the interest rates are simultaneously determined across the four markets. The final essay brings together insights gained in the preceeding essays to help analysis the interactions between each of the four markets at each of the four maturities selected within the consistent framework of a single model. The results indicate that the system can be usefully conceptualised as interactions between two sub-systems. The first sub-system models the nexus between Australia and the United States, and the second sub-system, that between the United Kingdom and Japan. The interactions within and between these two sub-systems are found to change as the maturity increases. At the shortest maturity, Australian interest rates are directly affected by both sub-systems. In contrast, at the longest maturity, Australian interest rates anticipate those of the United States and are not directly affected by the second sub-system.

The paper examines the transmission mechanism of monetary policy in an open economy with and without a binding zero bound on nominal interest rates. In particular, a foolproof way of escaping from a liquidity trap is suggested, consisting of a price-level target path, a devaluation of the currency and an exchange-rate peg, which is later abandoned in favor of price-level or inflation targeting when the price-level target is reached. This will jump-start the economy by a real depreciation of the domestic currency, a lower long real interest rate, and increased inflation expectations. The abandonment of the exchange-rate peg and shift to price-level or inflation targeting will avoid the risk of overheating. Some conclusions for Japan are also included.

The paper examines the transmission mechanism of monetary policy in an open economy with and without a binding zero bound on nominal interest rates. In particular, a foolproof way of escaping from a liquidity trap is suggested, consisting of a price-level target path, a devaluation of the currency and a temporary exchange rate peg, which is later abandoned in favor of price-level or inflation targeting when the price-level target has been reached. This will jump-start the economy and escape deflation by a real depreciation of the domestic currency, a lower long real interest rate, and increased inflation expectations. The abandonment of the exchange-rate peg and the shift to price-level or inflation targeting will avoid the risk of overheating. Some conclusions for Japan are included.

Mestrado em Economia Monetária e Financeira Este estudo tem por finalidade analisar a capacidade que as taxas de juro nominais têm para prever a inflação. Neste âmbito, foram escolhidas as metodologias de Engsted e Mishkin, para serem aplicadas aos Estados Unidos. De acordo com a metodologia de Engsted, o diferencial entre a taxa de juro nominal de longo prazo e a taxa de inflação constitui a previsão óptima da variação futura na taxa de inflação de longo prazo. O estudo aqui realizado permitiu-nos concluir, que esta variável possui poder para prever a inflação e que esse poder aumenta com o horizonte temporal da taxa de inflação, que é utilizada no cálculo do valor do spread. A metodologia de Mishkin debruça-se sobre a capacidade que a inclinação da curva de rendimentos nominais tem para prever a inflação e as taxas de juro reais. Conclui-se neste trabalho que os segmentos curto e longo da estrutura por prazo das taxas de juro nominais contêm mais informação para prever as taxas de juro reais, do que para antecipar a evolução futura da inflação. Esta situação fica a dever-se ao facto da volatilidade das alterações esperadas na taxa de inflação, ser maior do que a variabilidade da curva de rendimentos reais. Por oposição, a parte média da curva de rendimentos nominais prevê melhor a inflação do que as taxas de juro reais, em resultado das expectativas de inflação flutuarem mais do que a rendibilidade real esperada. Estas metodologias complementam-se uma à outra, na medida em que uma prevê melhor a inflação para o médio prazo (metodologia de Mishkin) e a outra prevê melhor para o longo prazo (metodologia de Engsted). This study examines the nominal interest rate ability to forecast fidure inflation. In this context, the methodologies of Engsted and Mishkin, applied to the United States, were chosen. According to the methodology of Engsted, the spreaçl between the long-term interest rate and the inflation rate is the optimal predictor of future changes in long-term inflation. This study concluded that this variable is able to predict inflation and this ability increases with the horizon of the inflation rate used to obtain the value of the spread. Mishkin's methodology examines the temi structure ability to forecast future inflation and the real interest rates. We concluded that the short and long segments of the yield curve have more information to predict the real interest rates than to forecast future inflation. This is due to the fact that the volatility of the expected changes in the inflation is bigger than the real term structure variability. On the other hand, the medium temi segment of the yield curve is a better predictor of the inflation than it is of the real interest rates, as a consequence of the fact that the inflation expectations are more variable than the expected real return. The two methodologies are complementary to each other, once Mishkin's methodology is a better predictor for the medium temi inflation whereas Engsted's methodology fits better the long-term inflation. info:eu-repo/semantics/publishedVersion

The Swiss law for the protection of tenants does not distinguish between nominal and real interest rates. As a result, rents are massively overindexed in periodes of high inflation. In the period 1990-1996, the structural faults in the swiss law have cost the tenants roughly 9 bio. Fr. The simplest way to eliminate the problems of the current law is to abolish the link between rents and mortgage rate, and permit a full indexation. For macro-economic reasons it would be preferable to smooth this indexation over time.