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Risks to Financial Stability in the Low Interest Rate Environment and its Housing Market Implications: CE Region Study
Meti, Elvira ; Geršl, Adam (advisor) ; Polák, Petr (referee)
iv Abstract The current state of the prolonged low interest rate environment may pose a great threat to the soundness of the financial system both in the eurozone countries as well as in the neighboring regions, such as in countries of Central Europe due to high interconnectedness of markets. Some of the recently identified risks of the low interest rate environment are a notable pickup in mortgage lending and house prices, and deterioration of profitability among banks. We study these channels for the Czech Republic, Hungary and Poland, investigating the impact of the imported ECB monetary policy on local (hos countries) during 2004Q4-2019Q4. Our findings suggest that house prices are further driven by low interest rates, and the effect is lagged by two quarters as looser monetary conditions need time to impact our dependant variables. Furthermore, a decrease in the mortgage rate increases mortgage lending in these countries. Lastly, in our study of 27 banks during 2004-2015, we find that ROAA declines by approximately by 17.8 %, given a one percent increase in the 3-month EURIBOR. Keywords low interest rates, EURIBOR, financial soundness, GMM, residential property, mortgages Author's e-mail 71263908@fsv.cuni.cz Supervisor's e-mail Adam.gersl@gmail.com
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Důvody dlouhodobě nízkých úrokových sazeb České národní banky
Urbanová, Daniela
The bachelor thesis deals with the modification of the reaction function of the Czech National Bank by using modified Taylor rule. This rule was introduced in 1993 by US economist John Taylor as a rule of the interest rate. The financial instability is associated with rapid growth of credit activity and rapid growth of asset prices and the period after financial crisis is associated with the reluctance of banks to provide loans. Besides traditional variables of Taylor rule the instability of credit loans provided by commercial banks was included and the effect of this variable on repo rate of the CNB was examined especially after financial crisis. The observed period is from January 2001 to December 2016. The main part of the theoretical part is dedicated to monetary policy of the Czech National Bank and channels of the transmission mechanism, monetary policy rules, the environment of low interest rates in context of liquidity trap and the financial instability.
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Bank credit risk management in the low-interest rate environment
Maivald, Matěj ; Teplý, Petr (advisor) ; Pečená, Magda (referee)
The thesis examines the relation of the low-interest rate environment to the banks' selected credit risk measures with a panel dataset on banks in Eurozone, Denmark, Japan, Sweden, and Switzerland covering the period 2011-2017. It employs a system GMM framework and a combination of bank-related and macroeconomic variables. This study builds on recent literature on effects of low-interest rates on banks' profitability and estimates the following three hypotheses: The potential effects of the low-interest rate on non-performing loans (NPL) ratio, risk-weighted assets (RWA) to total assets ratio, and changes in Tier 1 capital ratio. There are three main results: Firstly, the results suggest that a prolonged period of negative monetary interest rate can affect the NPL ratio and reveal a possible relationship between the 3M-interbank interest rate and NPL ratio. Thus, the thesis does not reject the first hypotheses. However, it rejects these hypotheses in case of the other two ratios. Secondly, the study finds a bank heterogeneity to be a significant determinant of the credit risk. Finally, using recent data, this thesis contributes to the literature focusing on the drivers of the NPL ratio, RWA to total assets ratio and Tier 1 capital ratio, where in case of the latter two the existing research is...
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Analysis of Causes of the Housing Bubble in Spain with Special Regard to Euro Currency
Fišer, Radim ; Babin, Jan (advisor) ; Mirvald, Michal (referee)
This paper examines fundamental causes of the housing bubble in Spain in 1999-1997. The thesis also critically evaluates the low interest rates of ECB, which are caused by inherent system fault of one interest rate for every state, even for states with high inflation rate and growth such as Spain or Ireland. I was able to provide evidence that ECB's interest rate was appropriate for France and Germany, but not for Spain. With econometric analysis of time series I was able to prove that low interest rate with regard to Taylor rule lead to a historically unprecedented housing bubble. These rates were even negative after inflation.
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