The Creators of Inside Money by D. Gareth Thomas

Author:D. Gareth Thomas
Language: eng
Format: epub
Publisher: Springer International Publishing, Cham

D. Gareth Thomas

Email: [email protected]

Keywords

Money supplySaving processInterest ratesBanksMarket rates

6.1 Introduction

In the last chapter, the nominal rate of interest , i, was formed by four elements within expression (5.​1), that is the real rate , ri, the premium for the expected rate of inflation , , the notion of liquidity , l, and the risk premium , . This part of the study concentrates on the two latter components, although there was application of the risk premium in the last chapter, in the main, the former were the centre of attention. Actually, in the developed financial markets, there is a vast range of instruments offering different interest rates and returns. This structure arises from the borrowing and lending over various periods of n (or terms) with varying degrees of risk . The premia on risky assets reflect the unwillingness of holders to offer or purchase such assets. The analysis examines whether there is a connection and interplay between the various rates of interest on borrowing and saving . The presentation relies heavily on Howells and Bain (2008) along with Mishkin (2016) for guidance and organisation, the difference is the application.

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