金融市場(chǎng)與機(jī)構(gòu) Jeff Madura 02

2DeterminationofInterestRates?2003South-Western/ThomsonLearningChapterObjectivesExplainLoanableFundsTheoryofInterestRateDeterminationIdentifyMajorFactorsAffectingtheLevelofInterestRatesExplainHowtoForecastInterestRatesRelevanceofInterestRateMovementsChangesininterestratesimpacttherealeconomyInvestmentspendingInterestsensitiveconsumerspendingsuchashousingInterestratechangesaffectthevaluesofallsecuritiesSecuritypricesvaryinverselywithinterestratesVaryinginterestratesimpactretirementfundsandretirementincomeInterestrateschangesimpactthevalueoffinancialinstitutionsManagersoffinancialinstitutionscloselymonitorratesInterestrateriskisamajorriskimpactingfinancialinstitutionsLoanableFundsTheoryofInterestRateDeterminationTheoryofhowthegenerallevelofinterestratesaredeterminedExplainshoweconomicandotherfactorsinfluenceinterestratechangesInterestratesdeterminedbydemandandsupplyforloanablefundsLoanableFundsTheory,cont.Demand=borrowers,issuersofsecurities,deficitspendingunitSupply=lenders,financialinvestors,buyersofsecurities,surplusspendingunitAssumeeconomydividedintosectorsSlopeofdemand/supplycurvesrelatedtoelasticityorsensitivityofinterestratesSectorsoftheEconomyHouseholdSector--UsuallyanetsupplierofloanablefundsBusinessSector—UsuallyanetdemanderingrowthperiodsGovernmentSectorsStates—BorrowforcapitalprojectsFederal—BorrowforcapitalprojectsanddeficitspendingForeignSectors—Netsuppliersinceearly1980’sDemandforLoanableFundsSumofsectordemand(quantity)atvaryinglevelsofinterestratesSectorcashreceiptsinperiodless

thanoutlays=borrowerQuantitydemandedinverselyrelatedtointerestratesVariablesotherthaninterestratechangescauseshiftindemandcurveDemandforLoanableFundsInterestRateQuantityofLoanableFundsLoanableFundsTheoryHouseholdsdemandloanablefundstofinancehousing,automobiles,householditemsThesepurchasesresultininstallmentdebt.InstallmentdebtincreaseswiththelevelofincomeThereisaninverserelationshipbetweentheinterestrateandthequantityofloanablefundsdemandedHouseholdDemandforLoanableFundsLoanableFundsTheoryBusinessesdemandloanablefundstoinvestinassetsQuantityoffundsdemandeddependsonhowmanyprojectstobeimplementedBusinesseschooseprojectsbycalculatingtheproject’sNetPresentValueSelectallprojectswith+NPV’sBusinessDemandforLoanableFundsLoanableFundsTheoryNetPresentValueiscalculatedasfollows:CFt(1+k)tt=1n–INV+NPV=BusinessDemandforLoanableFundsLoanableFundsTheoryProjectswithapositiveNPVareacceptedbecausethepresentvalueoftheirbenefitsoutweighstheircostsIfinterestratesdecrease,moreprojectswillhaveapositiveNPVBusinesseswillneedagreateramountoffinancingBusinesseswilldemandmoreloanablefundsBusinessDemandforLoanableFundsLoanableFundsTheoryThereisaninverserelationshipbetweeninterestratesandthequantityofloanablefundsdemandedThecurvecanshiftinresponsetoeventsthataffectbusinessborrowingpreferencesExample:EconomicconditionsbecomemorefavorableExpectedcashflowswillincrease>morepositiveNPVprojects>increaseddemandforloanablefundsBusinessDemandforLoanableFundsLoanableFundsTheoryWhenplannedexpendituresexceedrevenuesfromtaxes,thegovernmentdemandsloanablefundsMunicipal(stateandlocal)governmentsissuemunicipalbondsFederalgovernmentanditsagenciesissueTreasurysecuritiesandfederalagencysecurities.GovernmentDemandforLoanableFundsLoanableFundsTheoryFederalgovernmentexpenditureandtaxpoliciesareindependentofinterestratesGovernmentdemandforfundsisinterest-inelasticDInterestRateQuantityofLoanableFundsGovernmentDemandforLoanableFundsLoanableFundsTheoryAforeigncountry’sdemandforU.S.fundsisinfluencedbythedifferentialbetweenitsinterestratesandU.S.ratesThequantityofU.S.loanablefundsdemandedbyforeigninvestorswillbeinverselyrelatedtoU.S.interestratesForeignDemandforLoanableFundsLoanableFundsTheoryTheaggregatedemandforloanablefundsisthesumofthequantitiesdemandedbytheseparatesectorsTheaggregatedemandforloanablefundsisinverselyrelatedtointerestratesAggregateDemandforLoanableFundsSectorSupplyofLoanableFundsHouseholdsaremajorsuppliersofloanablefundsBusinessesandgovernmentsmayinvest(loan)fundstemporarilyForeignsectoranetsupplieroffundsinlasttwentyyearsFederalReserve’smonetarypolicyimpactssupplyofloanablefundsSupplyofLoanableFundsSumofsectorsupply(quantity)atvaryinglevelsofinterestratesSectorcashreceiptsinperiodgreater

thanoutlays—lenderQuantitysupplieddirectlyrelatedtointerestratesVariablesotherthaninterestratechangescausesashiftinthesupplycurveInterestRateQuantityofLoanableFundsSLoanableFundsTheoryEquilibriumInterestRateAggregateDemandDA=Dh+Db+Dg+Dm+DfAggregateSupplySA=Sh+Sb+Sg+Sm+SfInequilibrium,DA=SADemandforLoanableFundsSupplyofLoanableFundsInterestRatesQuantityofLoanableFundsGraphicPresentationLoanableFundsTheoryGraphicPresentationWhenadisequilibriumsituationexists,marketforcesshouldcauseanadjustmentininterestratesuntilequilibriumisachievedExample:interestrateaboveequilibriumSurplusofloanablefundsRatefallsQuantitysuppliedreduced,quantitydemandedincreasesuntilequilibriumGeneralEquilibriumInterestRateMeansofexplaininghoweconomicfactorsaffectinterestratelevelsInterestratelevelwherequantityofaggregateloanablefundsdemanded=supplySurplusandshortageconditionsSurplus-Quantitydemanded<quantitysuppliedfollowedbymarketinterestratedecreasesShortageGovernmentinterestrateceilingsbelowmarketinterestratesInterestRateChanges+Directlyrelatedtolevelofeconomicactivityorgrowthrateofeconomicactivity+Directlyrelatedtoexpectedinflation–InverselyrelatedtoratesofmoneysupplychangesEconomicForcesThatAffectInterestRatesEconomicGrowthExpectedimpactisanoutwardshiftinthedemandschedulewithoutobviousshiftinsupplyNewtechnologicalapplicationswith+NPV’sResultisanincreaseintheequilibriuminterestrateEconomicForcesThatAffectInterestRates:TheFisherEffectLenderswanttobecompensatedforexpectedlossofpurchasingpower(inflation)whentheylendNominalInterestRates=Sumofrealrateplusexpectedrateofinflation,ExpectedRealRate(exante)=expectedincreaseinpurchasingpowerinperiodRealizedRealRate(expost)=nominalrateslessactualrateofinflationinperiodiEIinr=+()EconomicForcesThatAffectInterestRatesInflationTheFisherEffectNominalInterestRates=SumofRealRateplusExpectedRateofInflationinirE(I)+=Figure2.12hereYear-505101520AnnualizedRealInterest

RateAnnualizedInflationAnnualizedT-BillRate19961995199419991998199719931992199119901989198819871986198519841983198219811980EconomicForcesThatAffectInterestRatesInflationIfinflationisexpectedtoincreaseHouseholdsmayreducetheirsavingstomakepurchasesbeforepricesriseSupplyshiftstotheleft,raisingtheequilibriumrateAlso,householdsandbusinessesmayborrowmoretopurchasegoodsbeforepricesincreaseDemandshiftsoutward,raisingtheequilibriumrateEconomicForcesThatAffectInterestRatesMoneySupplyWhentheFedincreasesthemoneysupply,itincreasessupplyofloanablefundsPlacesdownwardpressureoninterestratesEconomicForcesThatAffectInterestRatesFederalGovernmentBudgetDeficitIncreaseindeficitincreasesthequantityofloanablefundsdemandedDemandscheduleshiftsoutward,raisingratesGovernmentiswillingtopaywhateverisnecessarytoborrowfunds,“crowdingout”theprivatesectorEconomicForcesThatAffectInterestRatesForeignFlowsInrecentyearstherehasbeenmassiveflowsbetweencountriesDrivenbylargeinstitutionalinvestorsseekinghighreturnsTheyinvestwh