1. bookVolume 11 (2022): Edition 2 (May 2022)
Détails du magazine
License
Format
Magazine
eISSN
2336-9205
Première parution
11 Mar 2014
Périodicité
3 fois par an
Langues
Anglais
access type Accès libre

An Application of Index Number Theory to Interest Rates: Evidence from Selected Post-Soviet Countries

Publié en ligne: 30 Apr 2022
Volume & Edition: Volume 11 (2022) - Edition 2 (May 2022)
Pages: 165 - 186
Reçu: 14 Sep 2020
Accepté: 27 Apr 2021
Détails du magazine
License
Format
Magazine
eISSN
2336-9205
Première parution
11 Mar 2014
Périodicité
3 fois par an
Langues
Anglais
Abstract

In this paper, we use index number theory to decompose changes in total interest rate due to changes in the interest rate component and the weight component. We discuss the optimal calculation of a binary index using axiomatic index number theory. Based on this theory we compare alternative indexes and as a result, we choose the Marshall-Edgeworth index because most axioms are satisfied by this index. Comparing the results of binary periods decomposition, we conclude that the differences are not significant when we apply different indices. For multiple period comparison, we suggest using the chain index because it allows accounting for the weights evolution during the whole period. In addition, we derive a formula that could be useful for explaining the differences between chain and direct indexes when we produce multiple period comparison.

Keywords

JEL Classification

1. Akosah N. K., Alagidede, P. and Schaling, E. (2020). Interest Rate and Exchange Rate Volatility Spillovers: Multiscale Perspective of Monetary Policy Transmission in Ghana. Journal of Central Banking Theory and Practice, 2020, 1, pp. 135-167.10.2478/jcbtp-2020-0008 Search in Google Scholar

2. Allen, R.G.D. (1975). Index numbers in theory and practice. MacMillan-Palgrave, New York.10.1007/978-1-349-02312-7 Search in Google Scholar

3. Clements, K.W., Izan, H.Y. and Selvanathan, E.A. (2006). Stochastic Index Numbers: A Review. International Statistical Review 74, 235-270.10.1111/j.1751-5823.2006.tb00172.x Search in Google Scholar

4. Diewert, W.E. (1995). On the stochastic approach to index numbers. Discussion paper 95-31, Department of Economics, University of British Columbia, Vancouver, Canada. Search in Google Scholar

5. Diewert, W.E. (2002). Harmonized indexes of consumer prices: their conceptual foundations. Swiss Journal of Economics and Statistics 138, 547-637.10.2139/ssrn.357342 Search in Google Scholar

6. Diewert, W.E. (2005). Index number theory using differences instead of ratios. American journal of Economics and Sociology 64, 311-60.10.1111/j.1536-7150.2005.00365.x Search in Google Scholar

7. Fisher, I. (1921). The best form of index number. Journal of the American Statistical Association 17, 535 – 537 Search in Google Scholar

8. Fisher, I. (1922). The making of Index numbers. Boston: Houghton Mifflin Search in Google Scholar

9. Huerga, J. and Steklacova, L. (2008). An application of index numbers theory to interest rates. European Central Bank. Working Paper Series No. 939.10.2139/ssrn.1265502 Search in Google Scholar

10. Konus, A.A. (1924). The problem of the true index of the cost of living. Translated in Econometrica 7 (1939), 10-29. Search in Google Scholar

11. Kuncoro, H. (2020). Interest Rate Policy and Exchange Rates Volatility Lessons from Indonesia. Journal of Central Banking Theory and Practice, 2020, 2, pp. 19-42.10.2478/jcbtp-2020-0012 Search in Google Scholar

12. Mukhlis I., Hidayah, I. and Retnasih, N. (2020). Interest Rate Volatility of the Federal Funds Rate: Response of the Bank Indonesia and its Impact on the Indonesian Economic Stability. Journal of Central Banking Theory and Practice, 2020, 1, pp. 111-133.10.2478/jcbtp-2020-0007 Search in Google Scholar

13. Stuevel, G. (1989). The index-number problem and its solution. London, MacMillan.10.1007/978-1-349-10816-9 Search in Google Scholar

14. Von der Lippe, P. (2001). Chain indices: A study in price index theory. Statistisches Budesamt, Spectrum of Federal Statistics, vol. Wiesbaden. Search in Google Scholar

15. Wynne, M.A. (1997). Measuring short run inflation for central bankers – commentary, Review, Federal Reserve Bank of St. Louis 79:3, 161-167. Search in Google Scholar

Articles recommandés par Trend MD

Planifiez votre conférence à distance avec Sciendo