• Proceedings of the Safety Management and Science Conference
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• 2005.11a
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• pp.569-579
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• 2005

International capital movement has made progress at global liberalization of finance and foreign exchange, international monetary norm changing into floating exchange rate system, easiness of collection of information and trade at improvement of information communication technology from early of 1970's. Results of empirical test for relation between foreign exchange rate or various determination factors of foreign exchange rate and interest rate are followed by next sentences. First, according to relation between foreign exchange rate and interest rate, correlation for each of variables after OECD entrance is increased. 'But, long-term & short-term interest rate is affected by Hanbo & Kia's bankruptcy, continuous large scale coporates bankruptcy and crisis of foreign exchange. Therefore, financial instability is occured. If portfolio investment fund has been inflow as it is mollified by continuous shortage of foreign exchange and fall of country's credit rating, it is expected to have positive effect for long-term & short-term interest rate from appreciation of won against dollar. Second, results from relation between determination factor of foreign exchange rate and interest rate are followed by next sentences. If surplus of current account and goods account is continued, yield of corporate bond is to be stable. But, margin of surplus is expected to diminish after second quarter 98, and difference between external and domestic interest (after adjusting foreign exchange rate) is to be diminished. And if net inflows of foreign investor's fund (stock and bond) is diminished, it is to have negative effect for yield of corporate bond. According to foreign investor's investment movement of previous years, hedge fund were stayed at least during two years in Mexico. It means that sudden capital outflow is not to be happened at Korea.

• Asia Marketing Journal
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• v.12 no.3
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• pp.43-62
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• 2010

The notion of customer orientation is now importantly considered in the context of banking industries. Despite customer-oriented organizational cultures, there are few studies addressing the relationship between customer orientation and its outcomes. In particular, this study aims at testing the effect of customer orientation as a key marketing effort designed by a bank. This is because interest rate sensitivity is critical for evaluating banking services after raising the base rate. In so doing, first, this study investigates the relationships among customer orientation, interest rate sensitivity, and customer loyalty. Second, this paper examines how the moderating effects of both deposit interest and loan interest rates influence the linkages of customer orientation-interest rate sensitivity and customer orientation-customer loyalty. To test the proposed model, research data are collected from 304 subjects who use banking services(e.g., Shin-Han, Kookmin, the First Bank, Hana, and Woori banks). Each construct was measured by published items and the psychometric properties of the three constructs, excluding two constructs of the moderators, were evaluated by employing the method of confirmatory factor analysis via the use of AMOS. The model fit was also evaluated using the CFI, TLI, and RMSEA fit indices that are recommended based on their relative stability and insensitivity to sample size. The findings show that the relationship between customer orientation and customer loyalty is significant, whereas the relationships between customer orientation and interest rate sensitivity and between interest rate sensitivity and customer loyalty are not supported. Although customer orientation is highly evaluated, customers' interest rate sensitivity that results in the comparison of interest rates plays an important role in reducing the effect of customer orientation. As a consequence, interest rate sensitivity does not influence customer loyalty. First of all, one of interesting results in this study is that the moderating effect of loan interest rate is quite different from deposit interest rate. In the case of deposit interest rate, the linkages both customer orientation-interest rate sensitivity and customer orientation-customer loyalty are insignificant. In the case of loan interest rate, however, the two proposed linkages are supported. As our proposed relationships are still in its infancy in the context of banking industry, our study contributes to enhance scholars' knowledge of bank services and provides insights for practitioners when their marketing strategies, particularly both deposit and interest rates, have to be established. Finally, this research also illuminates the need for further research that considers the influence of customer orientation on consumer's decision-making and bank profits. More specifically, the results are encouraging and will lead us to further investigate this key outcome of the banking deposit/interest rates.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.11
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• pp.75-81
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• 2020

This study aims to empirically test the effect of liquidity and adequacy on bank performance through interest rate risk and credit risk. Capital adequacy and liquidity are variables that can affect the ups and downs of opinion, where the bank's performance in this study is the dependent variable. Good credit distribution can minimize the occurrence of defaults. This study uses banking companies in Indonesia that are listed on the Indonesian stock exchange, with a total number of 43 banking companies, this study however, uses only 30 companies ranging from years 2014 to 2019, primarily due to the availability of the limited data. The data analysis techniques used in this study is PLS-SEM with the WarpPLS application. The research results show that capital adequacy and liquidity has a positive effect on bank performance, interest rate risk and credit risk can mediate capital adequacy on bank performance, interest rate risk can mediate liquidity on bank performance, and interest rate risk has a positive effect on bank performance. However, credit risk can't mediate liquidity on bank performance and credit risk does not have a positive effect on bank performance. This is in line with the commercial loan theory, shiftability theory and the doctrine of anticipated income, which explains how best to give credit, both in longer and the shorter term.

• Asia-Pacific Journal of Business
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• v.5 no.1
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• pp.33-41
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• 2014

Since depositors are motivated by returns, it is important for Islamic banks management to understand the extent that rates of return on deposits influence their customers' decision to deposit. The main objective of the study is to explore the degree of influence of conventional bank's interest rate on Islamic bank's profitability and vice-versa. It has been seen from 2005 to 2011 that the rate of interest declared on deposit by conventional banks has a negative impact on profitability of both types of banks in Bangladesh. Rate of profit declared on deposit by Islamic banks is positively related with their profit earned but negatively related with profit earned by conventional banks. We see that rate of interest declared on deposit by Conventional Banks is positively related with their deposit volume but negatively related with Islamic Bank's deposit. On the other hand, rate of profit declared on deposit by Islamic Banks is negatively related with deposit levels of both types of banks. The survey result shows that almost 85% of the respondents are choosing Islamic banks only from their religious point of view and more than 60% of the sampled Islamic bank customers are reluctant to leave the bank even if conventional banks offer better interest rates.

• Journal of Venture Innovation
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• v.5 no.3
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• pp.71-80
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• 2022

The real estate market is an important part of a country's economy and plays a major role in economic growth through the growth of many related industries. Changes in interest rates affect asset prices and have a significant impact on housing prices. This study analyzed housing prices by dividing them into nationwide, local, and Seoul housing prices in order to analyze whether the effect of changes in interest rates on housing prices shows regional differences. The analysis was conducted from the first quarter of 2011 to the fourth quarter of 2021, and was analyzed using the DOLS model. The main analysis results are as follows. First, interest rates were found to have a significant negative effect on national housing prices, and a drop in interest rates significantly increased national housing prices and an increase in interest rates significantly lowered national housing prices. The consumer price index and loan growth rate also had a positive effect on housing prices nationwide, but statistical significance was not high. Second, interest rates had a negative effect on local housing prices, unlike national housing prices, but were not statistically significant. On the other hand, it was found that the consumer price index and loan growth rate had a larger and significant positive effect on local housing prices compared to national housing prices. Finally, it was found that the interest rate had the only significant negative effect on housing prices in Seoul. And this effect was greater and more significant than the effect on national and local housing prices. In the end, it was found that the effect of interest rates on Korean housing prices differs locally. Interest rates have a significant negative effect on national housing prices, and local housing prices, but they are not statistically significant. In addition, the interest rate was found to have the largest and most significant negative effect on housing prices in Seoul. In addition, it was found that there was a difference in the effect of macroeconomic variables on housing prices. This means that there are differences between regions with different factors influencing local and Seoul housing prices, and this point should be considered when drafting and implementing real estate policies.

• The Korean Journal of Financial Management
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• v.22 no.2
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• pp.213-226
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• 2005

Adverse selection is a heavily scrutinized subject within the financial intermediary industry. Consensus is reached regarding its effect on the loan interest rate. Despite the similar features of financial service offered by the credit card, we still have controversy regarding credit card interest rate on how is adverse selection incurred with the change of interest rate. Thus, this paper explores how does the adverse selection, if ever, take place and affect the credit card interest rate. Information asymmetry regarding the credit card users' type represented by the default probability is assumed. The users are assumed to be rational in that they want to minimize the per unit dollar expense associated with the commercial transaction and financing between the two typical payment methods, cash and credit card. Suppliers, i.e. credit card companies, would like to maximize their profit and would be better off with more pervasive use of credit cards over the cash. Then we could show that the increasing credit card interest rate is subject to the adverse selection, sharing the same tenet with that of the bank loan interest rate proposed by Stiglitz and Weiss. Hence the current theory predicts that credit card market also suffers from adverse selection with increasing interest rate.

• KDI Journal of Economic Policy
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• v.31 no.2
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• pp.15-45
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• 2009

This paper estimates the term structure of interest rates with the setup of 3-factor no arbitrage model and investigates the trend of term premia and the effectiveness of changes in policy interest rates. The term premia are found to be high in a three-year medium term objective, which can be interpreted as reflecting the recognition of investors who expect a higher uncertainty in real activities for the coming three years than for a longer term. Then, in order to look into the effect of policy interest rates after the recent change of benchmark interest rate, this paper analyzes the effects of the changes in short-term interest rates of the financial market on the yield curve of the bond market at time of change. Empirical results show that the discrepancy between call rate, short-term rate in money market, and instantaneous short rate, short-term rate in the bond market, is found to be significantly widened, comparing to the periods before the change in benchmark interest rate. It is not easy to conclude clearly for now whether such a widening gap is caused by the lack of experiences with managing new benchmark interest rate or is just an exceptional case due to the recent turmoil in the global financial market. However, monetary policy needs to be operated in a manner that could reduce the gap to enhance its effectiveness.

• Journal of Navigation and Port Research
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• v.45 no.5
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• pp.259-275
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• 2021

This study analyzed the decision-making process in ship finance for the choice between fixed and floating interest rates using behavioral finance theories. Results confirmed that causes and background of decision-making processes could be explicitly explained by the framework of behavioral finance theories. This study also determined whether decisions were irrational. A case-study research was applied as the methodology. Decision-making data on ship finance collected through narrative and questionnaire responses were analyzed and evaluated using behavioral finance theories. Theories of behavioral finance used in the analysis and research of this study included availability heuristic, anchoring effect, and opportunity cost theory. Narrative and survey responses were clearly explained by theories of behavioral finance. It was found that a shipping company suffered additional losses owing to decisions that included behavioral finance errors. Behavioral finance theories largely influenced the decision-making process of choosing between a fixed interest rate and a floating interest rate. Shipping finance decisions related to interest rate selections could be clearly explained by behavioral finance theories. Errors related to behavioral finance could result in irrational decisions. Thus, managers who are responsible for shipping finance should remain vigilant toward any behavioral finance errors when making shipping finance decisions.

• The Journal of Industrial Distribution & Business
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• v.9 no.6
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• pp.15-24
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• 2018

Purpose - The adjustment of one country's monetary policy can cause the macroeconomic change of other countries. Due to this, this paper attempts to analyze the impact of China's monetary policy on South Korea's exchange rate. Research design, data, and methodology - Based on the flexible-price monetary model, sets of annual time series from 1980 to 2017 are employed to perform an empirical estimation. The vector error correction model is also used to exploit the short-run relationship between both of them. Of course, the South Korea's real GDP, the China's real GDP, South Korea's interest rate, the South Korea's interest rate and the South Korea's monetary supply are treated as independent variables in this paper. Result - The long-run findings reveal that the China's money supply has a negative effect on South Korea's exchange rate. Respectively, the short-run findings depicts that the China's money supply has negative a effect on South Korea's exchange rate. Of course, other variables selected in this paper also have an effect on South Korea's exchange rate whatever positive or negative. Conclusions - As the empirical evidence shows, the China's monetary policy has a negative effect on South Korea's exchange rate whenever in the long run or in the short run.

• Journal of Distribution Science
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• v.11 no.10
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• pp.63-72
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• 2013

Purpose - This study analyzes the relationship and dynamic interactions between stock price index, interest rate, price index, and housing price indices using Korean monthly data from 2000 to 2013, based on a VAR model. This study also examines Granger causal relationships among these variables in order to determine whether the time series of one is useful in forecasting another, or to infer certain types of causal dependency between stochastic variables. Research design, data, and methodology - We used Korean monthly data for all variables from 2000: M1 to 2013: M3. First, we checked the correlations among different variables. Second, we conducted the Augmented Dickey-Fuller (ADF) test and the co-integration test using the VAR model. Third, we employed Granger Causality tests to quantify the causal effect from time series observations. Fourth, we used the impulse response function and variance decomposition based on the VAR model to examine the dynamic relationships among the variables. Results - First, stock price Granger affects interest rate and all housing price indices. Price index Granger, in turn, affects the stock price and six metropolitan housing price indices. However, none of the Granger variables affect the price index. Therefore, it is the stock markets (and not the housing market) that affects the housing prices. Second, the impulse response tests show that maximum influence on stock price is its own, and though it is influenced a little by interest rate, price index affects it negatively. One standard deviation (S.D.) shock to stock price increases the housing price by 0.08 units after two months, whereas an impulse shock to the interest rate negatively impacts the housing price. Third, the variance decomposition results report that the shock to the stock price accounts for 96% of the variation in the stock price, and the shock to the price index accounts for 2.8% after two periods. In contrast, the shock to the interest rate accounts for 80% of the variation in the interest rate after ten periods; the shock to the stock price accounts for 19% of the variation; however, shock to the price index does not affect the interest rate. The housing price index in 10 periods is explained up to 96.7% by itself, 2.62% by stock price, 0.68% by price index, and 0.04% by interest rate. Therefore, the housing market is explained most by its own variation, whereas the interest rate has little impact on housing price. Conclusions - The results of the study elucidate the relationship and dynamic interactions among stock price index, interest rate, price index, and housing price indices using VAR model. This study could help form the basis for more appropriate economic policies in the future. As the housing market is very important in Korean economy, any changes in house price affect the other markets, thereby resulting in a shock to the entire economy. Therefore, the analysis on the dynamic relationships between the housing market and economic variables will help with the decision making regarding the housing market policy.