Dynamic responses and tail-dependence among commodities, the US real interest rate and the dollar

Huang, Wanling; Mollick, André Varella; Nguyen, Khoa Huu

doi:10.1007/s00181-016-1165-6

Cited by 7 publications

(3 citation statements)

References 54 publications

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“…A related point is that speculators leave commodity markets if the IR is high since alternative investments offer higher returns at low risk (treasury bills). Empirical estimates tend to support theoretical findings that higher interest rates reduce commodity prices in general and energy commodities (most studies focus on oil) in particular, although estimated parameters are for the most part not significant or small 32,[36][37][38][39][40] . For this article, the impact on natural gas and hard coal prices is decisive.…”

Section: Viability Of Investments In Subsidy-free Renewablesmentioning

confidence: 79%

Adverse effects of rising interest rates on sustainable energy transitions

et al. 2019

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Increasing the use of renewable energy (RE) is a key enabler of sustainable energy transitions. While the cost of RE have substantially declined in the past, here we show that rising interest rates can reverse the trend of decreasing RE costs, particularly in Europe with its historically low interest rates. In Germany, interest rates recovering to pre-financial crisis levels within 5 years could add 11% and 25% to the levelized cost (LCOE) of solar PV and wind onshore, respectively, with financing costs accounting for roughly one-third of total LCOE. As fossil fuel-based electricity costs are much less and potentially even negatively affected by rising IRs, the viability of RE investments would be markedly deteriorated. Based on these findings, we argue that rising interest rates could jeopardize the sustainable energy transition and propose a self-adjusting thermostatic policy strategy to safeguard against rising interest rates. The Energy Politics Group (EPG) within the Department of Humanities, Social, and Political Sciences of ETH Zurich investigates questions related to the governance of technological change in the energy sector.

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Section: Viability Of Investments In Subsidy-free Renewablesmentioning

confidence: 79%

Adverse effects of rising interest rates on sustainable energy transitions

et al. 2019

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“…A c c e p t e d M a n u s c r i p t 6 negative for a substantial amount of time, which has been recently used by Huang et al (2015) on a study of disaggregated commodities (copper, cotton, gold and oil) and the value of the USD; yet without considering stock markets.…”

Section: Introductionmentioning

confidence: 99%

U.S. stock markets and the role of real interest rates

Huang¹,

Mollick²,

Nguyen³

2016

The Quarterly Review of Economics and Finance

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“…The effect of the real interest rate on stock prices is negative. Huang et al (2017) use daily US data and benefit from the VAR model and find that an increase in the interest rate decreases oil and copper prices and strengthens the US dollar and detect a negative relationship by the dynamic conditional correlation generalized autoregressive conditional heteroscedasticity (DCC-GARCH) model. Sollis and Wohar (2006) investigate a nonlinear relationship between the real exchange rate and the real interest rate differential measured by the difference between the domestic and the US real interest rate for several developed countries.…”

Section: Literature Reviewmentioning

confidence: 99%

Loom of Symmetric Pass-Through

Şahin

2019

Economies

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This paper analyzes the effects of the real policy interest rate on the banking sector lending rate, the deposit rate, real stock prices, and the real exchange rate using the Engle Granger cointegration method (EG), the vector error-correction model (VECM), and the nonlinear vector error-correction model (NVECM) with monthly Turkish data over the period January 2002–April 2018. (1) EG results indicate bivariate cointegration relationships between the real interest rate, lending rates, and the deposit rate. The real interest rate increases all lending rates, mainly the housing rate. However, the long-run coefficient for the real exchange rate is not statistically significant. The pass-through is higher for the deposit rate than for lending rates. Moreoever, real stock prices shrink substantially where the finance sector has been affected the most. (2) VECM results indicate a cointegration relationship between all the variables except for the real exchange rate, which has a statistically non-significant pass-through coefficient. The real interest rate has a noteworthy long-run positive effect on the housing loans lending rate compared to others. The affirmative effect on real stock prices is the highest for the technology sector. The short-run effect of the real interest rate on lending rates, real stock prices and the real exchange rate are statistically non-significant except for the overall stock price index, and the vehicle loans lending rate which has a higher coefficient than the deposit rate. (3) NVECM results allow testing of eleven hypotheses and highlight the symmetric relationship and the valid pass-through effect, and reject the strong exogeneity assumption for all variables.

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Dynamic responses and tail-dependence among commodities, the US real interest rate and the dollar

Cited by 7 publications

References 54 publications

Adverse effects of rising interest rates on sustainable energy transitions

Adverse effects of rising interest rates on sustainable energy transitions

U.S. stock markets and the role of real interest rates

Loom of Symmetric Pass-Through

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