金融市场与机构.pptVIP

2 Determination of Interest Rates Chapter Objectives Explain Loanable Funds Theory of Interest Rate Determination Identify Major Factors Affecting the Level of Interest Rates Explain How to Forecast Interest Rates Relevance of Interest Rate Movements Changes in interest rates impact the real economy Investment spending Interest sensitive consumer spending such as housing Interest rate changes affect the values of all securities Security prices vary inversely with interest rates Varying interest rates impact retirement funds and retirement income Interest rates changes impact the value of financial institutions Managers of financial institutions closely monitor rates Interest rate risk is a major risk impacting financial institutions Loanable Funds Theory of Interest Rate Determination Theory of how the general level of interest rates are determined Explains how economic and other factors influence interest rate changes Interest rates determined by demand and supply for loanable funds Loanable Funds Theory, cont. Demand = borrowers, issuers of securities, deficit spending unit Supply = lenders, financial investors, buyers of securities, surplus spending unit Assume economy divided into sectors Slope of demand/supply curves related to elasticity or sensitivity of interest rates Sectors of the Economy Household Sector--Usually a net supplier of loanable funds Business Sector—Usually a net demander in growth periods Government Sectors States—Borrow for capital projects Federal—Borrow for capital projects and deficit spending Foreign Sectors—Net supplier since early 1980’s Demand for Loanable Funds Sum of sector demand (quantity) at varying levels of interest rates Sector cash receipts in period less than outlays = borrower Quantity demanded inversely related to interest rates Variables other than interest rate changes cause shift in demand curve Demand for Loanable Funds Loanable Funds Theory Households demand loanable funds to finance housing, automobiles, househol