I assume that, every period, the effective short-term nominal interest rate
[R.sub.t] adjusts partially to the nominal interest rate
target [R*.sub.t] according to the following AR(2) process:
The cost of borrowing for the Cyprus government dipped below the 2% mark on Friday, with the 10-year bonds trading with a coupon of 1.97%, a good 40 basis points below the nominal interest rate
of the bond issued last September when Cyprus was removed from 'junk' investment grade by Standard and Poor's.
Last year, the real interest rate, which is the difference between the nominal interest rate
and inflation, has averaged about 1.45 percent.
Pinol said that SMEs owners are forced to jack up their prices as they have to pay exorbitant nominal interest rate
of 20 percent for the loans they have obtained in order to purchase the items they are selling.
The reduction of inflation variability has been accompanied by a decrease of its autocorrelation and also by a lower correlation with the short-term nominal interest rate
. This paper investigates the underlying sources explaining these swings of inflation dynamics using a medium-scale estimated dynamic stochastic general equilibrium (DSGE) model with money.
And in low rate environments savers and intermediaries trying to meet unrealistic nominal interest rate
targets may settle for inadequate compensation for extra risk they are taking.
Bullard noted that the Federal Open Market Committee (FOMC) operates by setting a short-term nominal interest rate
(i.e., the federal funds rate target), which is also referred to as the policy rate.
The maturity of the first tier, worth of USD1 billion, will be after five years from the date of issue with nominal interest rate
As emphasized by Friedman (in his eleventh proposition) and by Allan Meltzer, nominal interest rates
are not good indicators of the stance of policy, as a high nominal interest rate
can indicate either monetary tightness or ease, depending on the state of inflation expectations.
has been near the zero lower bound on the policy rate for the past several years and that the average short-term nominal interest rate
among the G-7 countries is expected to be close to zero over the medium term.
One way to estimate the natural rate is to take the long-range federal funds rate projection of Federal Open Market Committee members as a measure of the long-term nominal interest rate
, and subtract the Committee's inflation objective, since it is anchoring longer-run inflation expectations.
Louis President James Bullard has released results of research that examines options for optimal monetary policy when the short-term nominal interest rate
targeted by monetary policymakers (the policy rate) remains effectively at zero.