Consumption and the interest rate – A changing dynamic?

Interest Rate Policies in Consumption - Savings Dynamic Models

We examine the effect of interest rate policies on an agent’s consumption and savings when her income is fluctuating. In each period a long-lived agent decides how much to save (i.e., invest in a risk-free bond) and how much to consume while her income is uncertain and depends on the state of the economy. The central bank, on the other hand, fixes a policy, called an interest rate policy, which...

Investigating the Relationship between the Facility Interest Rate and the Bank Deposit Interest Rate in Iran

The facility interest rate is one of the most important macroeconomic variables. The bank facility interest rate is associated with other macro-economic variables, one of which is the bank deposit interest rate. Using the time series data of the 1973-2017 period and the simultaneous equation system, the researchers estimated four equations using the three-stage least squares method.The result o...

Consumption Habits and interest rate rigidity

In this paper we provide a micro model of loans which the lender is a monopolistic bank and the borrower is a competitive consumer with consumption habits who may default on part of his debt. In this setting, we prove that the loan demand curve is kinked and therefore it is possible to find interest rate rigidity in equilibrium as well as asymmetric response of loans to interest rate variations...

Dynamic Interest Rate and Credit Risk Models

Study of the Relationship between Inflation Rate and Bank Interest Rate in the Iranian Economy

Experts believe that by lowering the interest rate on bank accounts, total cost of goods and services decreases, and secondly, investment production increases,  both of which lead to lower inflation and provide stable employment field, on the other hand, are concerned about the negative effects of lowering the interest rate without lowering inflation and know the underlying requirement of nomin...