第5章 利率行为new.ppt

Chapter 5. The Behavior of Interest Rates 5.1 Theory of Asset Demand 5.2 Loanable Funds Framework: bond market 5.3 Liquidity Preference Framework: money demand and supply summary 5.1 Theory of Asset Demand which asset to choose? depends on RELATIVE comparisons between choices Determinants of Asset Demand Wealth—the total resources owned by the individual, including all assets Expected Return—the return expected over the next period on one asset relative to alternative assets Risk—the degree of uncertainty associated with the return on one asset relative to alternative assets Liquidity—the ease and speed with which an asset can be turned into cash relative to alternative assets A. Wealth greater wealth, greater resources B. Expected returns An increase in an asset’s exp ret.relative to that of an alternative asset, raises the Qd of the asset. C. Risk people are risk averse prefer lower risk if other factors are the same D. Liquidity how easily is an asset converted to cash? T-bill = easy real estate = hard In summary 5.2 Loanable Funds Framework: the Bond Market A. Bond Demand bond buyers/ lenders/ savers look at Qd as a function of expected return, price example 1 year, zero coupon bond YTM = exp. return so bond demand slopes down with respect to price Bond demand curve shifts in bond demand curve a change in wealth a change in exp. interest rates rising interest rates decrease value of existing bonds a change in expected inflation rising inflation decreases real return a change in the risk of bonds relative to other assets a change in liquidity of bonds relative to other assets B. Bond supply bond issuers/ borrowers look at Qs as a function of price, yield lower bond prices higher bond yields more expensive to borrow lower Qs of bonds so bond supply slopes up with price bond supply shifts in bond supply curve a change in expected profits affects incentives to expand production a change in expected inflation rising inflation decreases real cost of