the interest rate in the loanable funds market, and in red, the interest rate in the money market. If the real interest rate is above the nominal interest rate, either the investment exceeds the desired savings or the supply of money exceeds the demand of money. Shifting the saving curve to the right, and the demand of money to the right, will bring the interest rate in both markets to be the same. Money and real Interest Rate Fisher tries to establish the link between money and the interest rate
relationship between stock returns and economic growth, but very little empirical evidences to support the view with. Many economists and researchers supported the view that, stock returns and economic growth does not have a positive correlation which means economic growth or returns on equity are not dependent on each other. There are certain cases where the growth rate is high while the rate of return is negative, for e.g. during 2012 the stock return rate was 12.3%, while the growth rate remained
macroeconomic policy; the solid finding of this relation will enable policy makers to efficiently and effectively control the economy as well as the capital market. We aim to cover some relationship between macroeconomic indicators, including consumption, interest rate unemployment rate and inflation rate, and with stock price. Stock price or return and consumption Consumption has been viewed as one of the most fundamental and critical macroeconomic variables to explain the stock price/returns
Canada, Australia, New Zealand and Japan. Emerging countries can be identifying with rapid growth rate and development but lower per capita than developed countries, namely Brazil, Russia, India, and China, Ireland, Italy, Greece, Spain. The economic growth of countries can be measured by gross domestic product (GDP) per capita. This essay is going to find out “What are the main reasons behind different rate of economic growth in emerging and developed economics in last 15 years?” In hear I selected
equation for real interest rate, which is (r = i - π). Real interest rate equals the nominal interest rate plus inflation. This is a very basic equation. Fisher manipulated it to solve for i, in order to understand the effect that inflation has on nominal interest rate. The famous equation is i = r + π, nominal interest rate equals real interest rate plus inflation. This is basically saying that the nominal interest rate can be changed by a change in either the real interest rate or inflation. The
Table No: Correlation between Inflation and Total life insurance premium in India Year Inflation (in %) Premium (Rs. In Crores) 2000-01 34898.47 2001-2 4.3 50094.46 2002-03 4.1 55747.55 2003-04 3.8 66653.75 2004-05 3.9 82854.80 2005-06 5.2 105875.76 2006-07 7.3 156075.84 2007-08 8.1 201351.41 2008-09 9.8 221785.47 2009-10 12.7 265447.25 2010-11 291638.64 2011-12 287072.11 2012-13 287202.49 2013-14 314301.66 2014-15 328101.14 Correlation: r = significant: p = Source: RBI
will receive a coupon as an interest and at the maturity a principal plus coupon. (b) Coupon and principal of the Regular Treasury bonds are fixed, therefore if the inflation rate increases in the forecasting future, investor will receive the same amount of coupon and principal with less real value and purchasing power. (c)TIPS are simultaneously related to change of inflation rate which means the principal and coupon will adjust instantly to change of inflation rate. TIPS like Regular Treasury
was partly aimed at alleviating upward pressure on real interest rates due to declining inflationary expectations. Hitherto, the prospect of rising inflationary expectations has, for the most part, not been a major concern for either the Fed or investors. This may now be changing with the apparent breaking down of the condition known as “Gibson’s Paradox.” Gibson’s Paradox originally referred to the positive relationship between interest rates and the general price level outlined by Alfred Gibson
country. Interest rate, being a major factor of economics, plays a great role in economic activities carried out by nation and the nationalities. A change in interest rates may affect other factors of the economy. For instance, investment strategies of the investors, consumption strategies of the individuals, foreign exchange, imports, exports etc. are affected by the interest rates. An increase in interest rates may decrease the investment, decrease the consumption, and affect the exchange rates and
the relationship between interest rates and exchange rates in full, it will be useful to briefly discuss some of the important theories of exchange rate determination. There are many theories such as the theory of Purchasing Power Purchase Agreement (PPP), the Flexible Price Monetary Model (FPM), Sticky Price Monetary Model (SPM), Real Interest Rate Differential Model (RIRD), and Portfolio Balance Theory (PBT) of exchange rate determination. The PPP to maintain equality between domestic and foreign