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利率以及它对决策者的重要性 利率是重要的经济变量,但人们对利率的决定因素的理解仍然不太清晰。例如,在新古典利率理论中，利率被认为是由可贷资金的供给和需求决定的。与这种观点相反,后凯恩斯主义理论认为,利率是由中央银行决定的，并将它作为追求货币政策目标过程中的重要政策变量。然而,为了理解利率的决定因素,重要的是要首先理解利率的含义。 利率 在一段时间内，利率可以被定义为一个借款人为了使用不属于他的现金而支付一定的价格,然后返还给贷款人，并因推迟消费或借出资金而得到的价格。金融市场上的借款和贷款在很大程度上取决于利率。在经济学中,利息是为资本服务而支付的费用，它代表了资本回报率。换句话说,利率就是雇佣资本的价格。资本作为一种生产要素,以机械、设备或其他实物资产的形式用于商品生产，资本必须由企业家用资金购买。 Interest rates and its importance to policy makers Interest rates are key economic variables but the understanding of their determinants is still confounding. In neoclassical interest-rate theory for instance, the interest rate is believed to be determined by the supply of and demand for loanable funds. Contrary to this view, the Post Keynesian approach sugests that the interest rate is determined by central banks as a key policy variable in pursuit of its monetary policy objective. However, in order to understand the determinants of interest rate, it is important to first understand the rate of interest. The Rate of Interest Interest can be defined as the price a borrower has to pay to enjoy the use of cash which he does not own, and the return a lender enjoys for deferring consumption or parting with liquidity for a period of time. Borrowing and lending in the financial market depend to a significant extent on the rate of interest. In economics, interest is a payment for the services of capital. It represents a return on capital. In other words, interest is the price of hiring capital. Capital, as a factor of production, takes the form of machinery, equipment or any other physical assets used in production of goods which funds must be made available to the entrepreneurs to buy. Purchase of capital assets is called investment and funds made available for the purchase of such capital assets is called financial capital. Some persons have to supply this financial capital to the entrepreneurs who would use it for investment in real capital assets. The payment to those who supply financial capital for its use is called the market rate of interest. This is expressed as a percentage of sums of funds borrowed. Types of Interest Rates The nominal interest rate is the rate that is actually paid on loanable funds in monetary form. It the rate that is quoted on any short or long term debt instrument which does not take into account the tendency of fluctuations in the purchasing power of money- inflation. Since the interest rates and loans are typically in nominal money quantities, rather than real physical quantities, the nominal interest rate must contain an allowance for the rate of price changes so that lender's wealth is not eroded away by inflation. Thus a real interest rate r has two components: nominal interests rate i and expected inflation π. The real interest rate is the interest rate paid or received after taking into consideration the effect of inflation: i=r+π In the real life, interest rates paid will also depend upon the possible risk premium (the perceived riskiness of the asset and its liquidity). Thus, if l is a liquidity premium and σ is a risk premium, then we have: i=r+π + l + σ Importance of Interest Rates Interest rate plays a very important role for firms’ and individuals’ investment, consumption and savings decisions. This is because loanable funds are as a result of lender’s ability to forego present consumption in conditions of comparative uncertainty, in return for consumption later, in an uncertain future. It is an incentive to compensate savers to forgo actual consumption and lend to the deficit sector for investment purposes. (Howells and Bain 2005: 183) Over the years, interest rate has played an important role in driving growth and development in the economy through the effective bridging of funding gaps between the surplus and the deficit sectors of the economy. However, it has also placed succeeded in placing economic burden on individuals and businesses who have often struggled to meet up with the cost associated with the funds utilised for investment purposes. More so, the burden of interest rate has a multiplier effect on the economy as it is often been passes onto the final consumers with its attendant effects on their purchasing power and multiplier effect on other macroeconomic variables. For this reason, a lot of criticism has come the way of proponents of interest rates by the advocates of “Ethics, Usury and Islamic Finance” who has argued that this concept is not ethical and an undue compensation to fund providers who are not partakers of project risks. This factor has prompted the development of a new brand of finance to cater for the above aberration which forced a lot of banks to look the way of establishing Sharia compliant finance products to meet the needs of customers within that falls within this class. Although this fastest growing brand of finance has won a lot of accolade from its pundits, it’s not without its own share of controversies as some Islamic scholars believe that sharia-compliant finance actually goes against the spirit of Islam and the Qur’ān. Determinants of Rates of Interest There are a lot of factors responsible for determining the rate of interest in any economy. These factors has been summarised via two theories namely: The Loanable Funds Theory This theory attempts to identify the approximate causes of interest rate variations by analysing the supply of and demand for credit. The theory derives from the notion that savers make a decision between consumption now and consumption in the future. According to this theory, the rate of interest is determined at that level which equates the supply of securities with the demand for them, or, stated differently, the factors determining the interest rate are real investment demand and real saving – what the neoclassical economists called the forces of ‘productivity and thrift’ (Froyen 1996). The demand for loanable funds arises from firms’ desire to borrow to fund real investment (investment in capital goods or labour in order to produce goods or services). Real investment is a negative function of the interest rate since the interest rate reflects the cost of finance. All things equal, the lower the rate of interest, the more investment projects become profitable and the more willing investors will be to borrow in order to invest. This gives rises to a downward-sloping demand curve, which its position depends upon the productivity the assets to be financed. A supply of loanable funds, on the other side, arises from the desire of agents (households, individuals or other firms) to save, i.e. to forego consumption. In deciding between instant gratification or present consumption and future gratification or saving, the individual is concerned with the opportunity cost of each alternative. This opportunity cost is represented by the rate of interest. The higher the rate of interest, the greater the opportunity cost of present consumption, the higher the rate of saving. The supply curve’s position also depends upon agents’ (potential savers’) rate of time preference — individuals with a high rate of time preference have a strong preference for consumption now as opposed to consumption in the future and thus will require a correspondingly high rate of interest to induce them to save. The equilibrium real rate of interest will be that rate at which the demand for funds is equal to the supply of funds. According to the loanable funds theory, given an exogenous shock, the system maintains itself in equilibrium at full employment by changes in the equilibrium rate of interest. Any fall in investment, for instance, would be perfectly offset by an increase in consumption, and vice versa for a rise in investment demand. Similarly, any shift in the saving schedule will cause, via the rate of interest, an offsetting change in investment so as to ensure full employment. The Liquidity Preference or Money Market Theory The liquidity preference theory can be defined as a theory of the demand for money that depends, amongst other things, on the interest rate. This theory assumed that economic agents’ actions determine nominal rates of interest. This nominal rate is determined by the demand for money relative to its supply. Liquidity is seen as flexibility in a world of uncertainty. To accept less flexible alternatives, agents had to be bribed, that is, they had to be compensated for holding an asset that is less liquid than money. The interest rate, as the representative of this compensation, had to be whatever was necessary to convince agents to ‘part with liquidity’. The higher the degree of illiquidity of an asset, the higher the compensation necessary to convince wealth holders to accept the risks it represents. In an uncertain world, people seek a degree of liquidity and it is this demand for liquidity that is a major element in the determination of interest rates. In liquidity preference theory, the holding of money is not merely seen as a medium of exchange, but also as an asset. The money is not demanded for transactions purpose only - money as a medium of exchange as there could a precautionary demand and a speculative demand which fall under demand for money as an asset and not as a medium of exchange.#p#分页标题#e# According to the loanable funds theory of interest rate determination, the demand for loanable funds should rise as the interest rate falls. i.e. a low cost of borrowing should encourage entrepreneurs and firms to invest and engage in real productive activity. However, if interest rates are low which will then lead to agents’ expectations that the interest rate will rise. Given this inverse relationship between asset prices and their yield, an expectation that interest rates will rise is synonymous to an expectation that asset prices will fall. In such a context it is rational for entrepreneur and speculators to hold money as opposed to other assets, whose price they expect to decline. Thus these agents will keep holding onto money however low the interest rate falls. This is referred to as the liquidity trap. Effect of Change in Interest Rate The basic argument of interest rate policy is that a rise in the interest rate raises the cost of credit and thus discourages investment as well as consumption financed with loans. On the other hand, lowering of the rate of interest cheapens the cost of credit and thus encourages investment expenditure as well as consumption expenditure. Hence, the interest rate policy can be used as a contra cyclical measure. A change in the short-term rate of interest can be brought about by changing the bank rate, the rate at which the central bank of a country discounts the first rate short term bills of exchange. It is assumed that a change in the bank rate directly influences the rate of interest charged by the commercial banks on their advances, as well as the other short-term interest rates, such as those charged for money at call, bill discounted, hire purchase finance etc. However, the short-term rate of interest is relevant to investment in inventories. A change in this rate is not likely to influence it significantly, as interest cost constitutes only a small part of the total cost. Similarly, it may not affect the consumption facilitated by purchase, provident fund contributions and insurance premium. A change in the short-term rate of interest can effectively change the value of credit taking some factors into consideration. This can be explained by an example of increasing short-term rate of interest with a view to control inflationary situation. It will give rise to following difficulties: It will add to the balance of payment difficulties by increasing the cost of short term borrowing from abroad. It will increase the cost of serving the national debt. It may also tend to pull up the long term rate of interest as Determinants of people may begin to expect rise in the long term rate of interest rates interest, and thus, they may begin to sell long- term securities in consequence of which their prices will fall and long-term rate of interest yielded by them will rise. The term structure of interest rates and the Yield Curve The term structure of interest rates is an attempt to identify the relationship between short-term and long-term interest rates. A diagrammatic illustration of this relationship is known as the yield curve, which illustrates the relationship between maturity and yield at any given time, assuming all other factors to be constant. The yield curve can be constructed by plotting the yield to maturity (YTM) along the vertical axis, while the horizontal axis shows the term to maturity (measured in years). The shape of yield curves changes over time in response to factors such as changes in interest rate expectations and fluctuations in liquidity in the economy. Several different shapes have been observed, but yield curves are usually described as upward (normal), downward (inverse) or horizontally (flat) sloped. Different possible shapes of the yield curves According to the expectations theory, expectations play a key role in determining the shape of the yield curve illustrated above. In an upward-sloping yield curve, for example, if long-term rates are higher than short-term rates, and if long-term rates are an average of expected short-term rates, then looking ahead these short-term rates must be expected to rise. A positive or normal yield curve can be interpreted to mean that on average the market expects short-term interest rates to rise. Likewise, a downward sloping yield curve is interpreted to mean that on average the markets expect short-term interest rates to fall. Such a yield curve often prevails when interest rates are high because of tight monetary policies. Under these circumstances there may also be expectations of a fall in inflation. A flat yield curve means that the market expects short-term rates to remain unchanged, and a humped yield curve implies that short-term rates are expected to first rise and then to fall. Monetary Policy and Interest Rate Monetary policy refers to the policy measures adopted by the Central Bank of the country such as changes in rate of interest (i.e. change in cost of credit) and the availability of credit. The policy regarding the growth of money supply also comes under the purview of monetary policy. Changes in bank rate, open market operations, cash reserve ratio of banks, selective credit controls are the various instruments of monetary policy. The central bank tries to maintain price stability through controlling the level of money supply. Thus, monetary policy plays a stabilizing role in influencing economic growth through a number of channels. However, the scope of such a role may be limited by the concurrent pursuit of other primary objectives of monetary policy, the nature of monetary policy transmission mechanism, and by other factors, including the uncertainty facing policy makers and the stance of economic policies. In addition, the concurrent target of intermediate goals may have implications on the attainment of the ultimate objective of achieving sustainable growth. The contribution that monetary policy leads to sustainable growth is the maintenance of price stability. Since sustained increase in price levels is adjudged substantially to be a monetary phenomenon, monetary policy uses its tools to effectively check money supply with a view to maintaining price stability in the medium to long term. Theory and empirical evidence in the literature suggest that sustainable long term growth is associated with lower price levels. In other words, high inflation is damaging to long-run economic performance and welfare. Monetary policy has far reaching impact on financing conditions in the economy, not just the costs, but also the availability of credit, banks’ willingness to assume specific risks, etc. It also influences expectations about the future direction of economic activity and inflation, thus affecting the prices of goods, asset prices, exchange rates as well as consumption and investment. A monetary policy decision that cuts interest rate, for example, lowers the cost of borrowing, resulting in higher investment activity and the purchase of consumer durables. The expectation that economic activity will strengthen may also prompt banks to ease lending policy, which in turn enables business and households to boost spending. In a low interest-rate regime, stocks become more attractive to buy, raising households’ financial assets. This may also contribute to higher consumer spending, and makes companies’ investment projects more attractive. Low interest rates also tend to cause currency to depreciate because the demand for domestic goods rises when imported goods become more expensive. The combination of these factors raises output and employment as well as investment and consumer spending. Importance of Interest Rate to Policy Makers and Other Economic Actors Monetary policies are tools used by the Central Bank to control the supply of money usually through the use of interest rate to promote economic growth, development and stability. These policies are targeted towards ensuring relatively stable prices and low employment. Monetary policies could be expansionary on contractionary. Expansionary policies are used to address unemployment during recession through the use of reduced interest rates to make credit facilities available to business and hence, encourage expansion and increase employment rate while Contractionary policies are used to reduce money supply and slow inflation with the hope of avoiding the deterioration of asset values. The contraction of the monetary supply can be achieved indirectly by increasing the nominal interest rates. Policy makers in different countries have differing levels of control of interest rates. For instance, in the United States, the Federal Reserve can set the discount rate, as well as achieve the desired Federal funds rate by open market operations. This rate has significant effect on other market interest rates, but there is no perfect relationship. In the United States, open market operations are a relatively small part of the total volume in the bond market. One cannot set independent targets for both the monetary base and the interest rate because they are both modified by a single tool which is the open market operations. A decision will have to be taken on which one to control. In other countries, the Central Bank may be able to mandate specific interest rates on loans, savings accounts or other financial assets. By raising the interest rate(s) under its control, a monetary authority can contract the money supply, because higher interest rates encourage savings and discourage borrowing. Both of these effects reduce the size of the money supply. The objective of monetary policy makers in any economy is as summarised below and interest rate is one of the tools that is utilised by policy makers is achieving their objectives: LONG TERM OBJECTIVES Interest rate is the only instrument utilised by Central Banks in controlling the economy. The use of this economic tool has its attendant effect on economic growth and development and other players within the economy such as consumers, lenders and borrowers of fund. The application of interest rate has its impact on the volume and cost of money in circulation and is also an effective tool in managing inflation, price levels and monetary aggregates within the economy. The importance of interest rate to policy makers and other economic actors is as follows: Interest Rate, Inflation and the Economy: The policy makers use interest rate to manage the percentage of inflation or achieve a target inflation rate within the economy. Using this approach, inflation rate below the Consumer Price Index are usually targeted and attained through the use of interest rate to control the money in circulation. The interest rate used is generally the interbank rate at which banks lend to each other overnight for cash flow purposes. The interest rate target is maintained for a specific duration using open market operations. Typically the duration that the interest rate target is kept constant will vary between months and years. This interest rate target is usually reviewed on a monthly or quarterly basis by a policy committee. In the event of inflation, interest rate (cost of funds) will be increased and this will invariably, reduce the volume of funds assessable to the economy and its attendant effect on reducing inflation and vice versa. Interest Rate, Price Level and the Economy: Interest rates are used by policy makers to control the price levels of goods and services within the economy. Increase and/or decrease in interest rate advanced to firms have its multiplier effect on the prices of goods and services that gets to the final consumers. This also has its impact on the purchasing power of individuals and firms within the economy. Interest Rate, Monetary Aggregates and the Economy: Policy makers use interest rate to control the volume of money in circulation through the increase or decrease in the discount rate with which the banks borrow funds from the Central Banks. This has a direct impact on the cost of loanable funds available to individuals and firms within the economy. It also impacts the productive capabilities of the economy, employment and purchasing power of individuals. |
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