Bellas, A. A Primer for Benefit Cost Analysis. Working Paper. Seattle, Washington. Silver Spring, MD. OMB Circular A Washington, D. Environmental Protection Agency. Guidelines for Preparing Economic Analyses. EPA R Greeley-Polhemus Group, Inc. IWR Report R Army Corps of Engineers. Fort Belvoir, VA. Hanley, N. Splash eds. Edward Elgar. Northampton, MA. Harrington, K.
Alexandria, VA. Hartwick, J. The Economics of Natural Resource Use. Second Edition. Addison Wesley Longman. New York, NY. Lazo, J. McClelland, and W. Pages to Salant, S. Pages 93 to Von Tongeren, J.
London, UK. Coastal Ecosystem Restoration. Environmental Economics. Environmental Valuation. Methods for Environmental Valuation. Social Value versus Economic Impact. Discounting and Time Preference. Risk and Uncertainty in Environmental Restoration Programs.
Irreversibility, Sustainability, and Safe Minimum Standard. Habitat Equivalency Analysis. Annotated Bibliography. Adaptive Management. Dissemination of Results. In Finland, the limit for discounting is fixed for most of the discounting banks at 2. In the Republic of China, the amount of central bank credit at the call loan rate is limited to 10 per cent of the total deposits in the borrowing bank. In Greece and Iran, credits are determined individually according to the creditworthiness of each bank.
In most countries where quantitative limits are imposed, there is also a series of penalty rates payable on amounts borrowed in excess of those limits. In the Republic of China, credits in excess of 10 per cent of total deposits of the borrowing banks are charged at the highest rate on the market. The Bank of France quotes two penalty rates. In Pakistan, a highly progressive schedule of penalties is applied to banks exceeding the quota established by the State Bank.
In India, scheduled banks may borrow from the Reserve Bank at the bank rate when their net liquidity position 20 is at or above 30 per cent. When this condition is not fulfilled, for every percentage point or fraction thereof by which the ratio falls below 30 per cent, the rate charged on the entire amount borrowed by a commercial bank from the Reserve Bank is stepped up by 1 per cent above the bank rate.
In Japan, Korea, Tunisia, and most of the Latin American countries, heavy penalties are also applied. In several countries, quantitative limits are imposed on central bank lendings, but there is no schedule of penalties. Here, either the central bank has strict control over bank accounts or the banking institutions are fearful that the central bank may take reprisals. The result is that the limits set up by the banking authority are seldom exceeded.
The Bank of Greece keeps strict control over the volume of credit granted to commercial banks so that under no circumstances can the limit be exceeded. In the Philippines, a penalty rate of 8 per cent was enforced until May ; since then, borrowings in excess of the quota are referred to the Monetary Board and the penalty is determined on a case-to-case basis. In South Africa, while no statutory or customary schedule of penalties exists, the Reserve Bank may apply penalty rates to banks when it deems that calls on its credit are undesirable or excessive.
In developed economies, where changes in the rate are made frequently and where there are only one or two discount rates, a change in the rate clearly reflects the wish of the monetary authority to change the system of interrelated rates, and through these changes to expand or contract the whole volume of credit.
In less developed countries, a change in the rate is more likely to be made in conjunction with other measures designed to change the distribution of credit rather than to influence the rate structure.
Econometric measurements seem to prove that for the less developed countries as a whole, interest rates play only a small role in explaining the demand for money.
In developing economies, especially those suffering from substantial inflation, the effects of changes in the discount rate are indeed minimized. In these countries, the gap between the interest rate charged by the banks to the public and the rate that they pay for their own borrowings is so wide that the first can only be affected by very substantial changes in the discount rate. Small increases in the rate can easily be absorbed by the commercial banks and can only reduce insignificantly their profits from the interest differential.
Changes in the discount rate in such countries are infrequent, while in most developed countries changes are made often. The following number of changes were made in some representative less developed countries from the end of to September Mexico none, Uruguay none, Peru 1, Colombia 2, Iran 2, Pakistan 2, Venezuela 2, and India 5. By contrast, changes in some developed countries were as follows: Finland 10, the United States 24, Germany 25, Belgium 25, and the United Kingdom The number of changes, however, is not the only indication of changes in discount policy, nor can one evaluate the policy followed in a country merely by noting the movements in the discount rate quoted by the central bank.
Other terms and conditions of discounting are probably as important or more so. In developed countries, there is usually a single discount rate, or only a limited number of rates.
In Austria, the National Bank quotes a rate 4. In Belgium, the National Bank applies different rates according to the guarantee given with the documents presented for discounting, and according to whether bank acceptances originate from imports or exports.
In the Federal Republic of Germany, there are two rates, one for discounts and another for advances. In Switzerland, besides the ordinary discount rate 2. The money market rate and bank rate were the same until June 23, In South Africa, the discount rate is considered a major indicator of the policy pursued by the Reserve Bank, which quotes only one rate for its operations with discount houses, commercial banks, the National Finance Corporation, and the Land Bank.
The Bank establishes quantitative limits for credits to banks. Regardless of those limits and of the rate quoted, the Bank, when granting accommodation, is free to exercise its discretion in applying penalty rates or rates below the discount rate on any type or types of securities and to any client or group of clients.
In Australia, the Reserve Bank does not disclose a discount rate. Operations with banks are very few and only take place in special circumstances. The terms and conditions of discounting are determined on the basis of a study of each request.
The Bank discounts Treasury notes and Commonwealth Treasury bills; however, neither the terms of its operations, nor the amounts lent, are revealed by the Bank. In some countries, there are fixed rates; in others, they may vary within certain limits, as do those for advances on bonds and shares in Denmark.
In Sweden, there is a basic discount rate which serves primarily as a key indicator of monetary policy; the basic rule is that the interest rate on loans to credit institutions is equal to the official discount rate for the first five days and thereafter is 1 per cent higher. In developing economies where, as we have said, the discount rate plays more the role of a device for the allocation of credit among sectors than of an instrument to control the volume of credit, the number of discount rates is large.
These countries rely heavily on selective policies, on the assumption that by using these policies they can modify the level of effective demand and, therefore, the general level of prices and production. Furthermore, monetary authorities in these countries believe that they can influence not only the volume of production but also the composition of investment and production, by discriminating in the cost and availability of credit for different purposes.
In these countries, differential rates are charged according to the kind of paper discounted or used as collateral against borrowing. Generally, a basic rate is used for discounting commercial paper.
Some examples will show that what central banks call the basic discount rate is not always the most representative cost of borrowing from the central bank. For many countries, the basic rate is a non-operational instrument. In Thailand, for instance, the basic discount rate is 7 per cent per annum, but the most representative rate is the one of 5 per cent applicable to discounts to banks for paper arising from export operations, from the procurement of raw materials for industrial use, and from sales of industrial products by manufacturers.
In Iceland, there is a basic discount rate, with the character of a penalty rate, rarely applied to central bank lending to banks; the volume of financing provided to commercial banks, however, is considerable, mostly in the form of discounting export bills at preferential rates, which are much lower than the basic discount rate. In Peru, the Central Reserve Bank quotes two rates for discounts to commercial banks, four for its loans to development banks, and one for direct credit to businesses.
In Colombia, the central bank quotes ten rates for operations with banks and a similar number for direct credit to the Central Government, financial corporations, and the private sector.
The Central Bank of Ecuador quotes nine rates for operations with commercial and specialized banks, four for direct credit to the business sector, and one for its operations with the Central Government and official institutions. Preferential quotas and differential discount rates available to specialized banks are common instruments for the selection of credit in most developing countries.
These are investment institutions partly financed by the government, cooperative banks, and other agencies engaged in the development of specific sectors of the economy but with a general objective of promoting economic development.
Summing up, in developed money markets the discount rate is determined in the light of the actual and potential demand and supply of money arising from internal forces, and is affected by international movements of short-term capital. In practically all developing countries, on the other hand, the rates are policy instruments, established to encourage credit expansion to sectors with a high potential for economic development, or to discourage investment in other sectors.
Changes in the basic rate, and even in preferential rates, are rare; usually, adjustments in central bank lending operations are made by altering other terms and conditions of discounting.
If the central bank wishes to encourage one particular sector, a new preferential rate is created. Moreover, in a number of developing countries the rate is never operative because the commercial banks always have excess liquidity; in these countries, therefore, the rate has no significance for the monetary and financial system.
This paper is based on information provided to the Bureau of Statistics of the International Monetary Fund by correspondents of International Financial Statistics.
Brief notes on the discount rate and discount practices in a number of countries are given in the country pages of that publication. In definitions of discount policy, the temporary character of the operation is often emphasized. Among several other writers, Peter G. As will be seen later in this paper, there are several central banks that provide credit to the banking institutions on a regular basis, and not temporarily.
Therefore, the temporary character that discount operations have in certain countries, e. Graeme S. XII , p. In this country, there is a sharp controversy between opponents and advocates of discount operations as effective instruments of monetary policy. LXVI , pp. Comptroller of the Currency , Vol. For a description of discount administration, see George W. Italics provided. In Chile, for example, the discount rate since April has been fixed twice a year in June and December and is equal to the weighted average interest rate charged by commercial banks on their own loans during the preceding year.
This rate is therefore rather high, and banks do not have much inducement to discount at the Central Bank. However, in November , to encourage the development of nontraditional exports, the Bank established a rate of 2 per cent per annum for discounting this kind of paper and has since provided substantial amounts of credit at that rate.
All Rights Reserved. Topics Business and Economics. Banks and Banking. Corporate Finance. Corporate Governance. Corporate Taxation. Economic Development. Economic Theory. Economics: General. Environmental Economics. Exports and Imports. Finance: General. Financial Risk Management. Foreign Exchange. Industries: Automobile. Industries: Energy. Industries: Fashion and Textile. Industries: Financial Services. Industries: Food. Industries: General. Industries: Hospital,Travel and Tourism.
Industries: Information Technololgy. Industries: Manufacturing. Industries: Service. Information Management. International Economics. International Taxation. Investments: Bonds. Investments: Commodities. Select basic ads. Create a personalised ads profile. Select personalised ads.
Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Setting a high discount rate tends to have the effect of raising other interest rates in the economy since it represents the cost of borrowing money for most major commercial banks and other depository institutions.
This could be considered a contractionary monetary policy. Exactly how much a high discount rate affects the economy as a whole depends on the relationship between the discount rate and the normal market rate of interest for loans to banks. In part, interest rates represent the cost of borrowing money.
When it is less expensive for banks to borrow money from the Federal Reserve, they can subsequently charge less interest on their own loans. This has a ripple effect on the demand for loanable funds everywhere unless the market rate of interest is equally as high. Interest rates also coordinate savings in the economy.
When too few actors want to save money, banks entice them with higher interest rates. More arguments against high discount rates can be found in this post from NRDC chief economist Laurie Johnson to whom we will return later. An increasingly disrupted climate may hamper economic productivity, causing economic growth rates to deviate below their historical trajectories.
If worse-case climate risks materialize, climate change could even reverse economic growth. In that instance, people in the future would be poorer than people today, not wealthier. This is the big one for me. Are we really so sure economic growth will continue as it has during our age of energy and carbon abundance? Surely a more precautionary approach, akin to purchasing insurance, is appropriate.
Private investors and hence market returns do not take into account pollution externalities resulting from production, such as the depreciation of natural capital e. They therefore tend to overestimate the impact growth has on real social welfare. Private investment decisions are made entirely within market rules, but some market rules may be maladapted to social welfare, especially future social welfare.
Market growth in these circumstances only exacerbates maladaption. Social and ethical decisions must encompass a broader perspective than markets can provide.
Even if income grows under a changing climate, it is unlikely that the people most harmed by climate change will be the recipients of that growth. The more provocative way to put this point is that global economic growth is entirely consistent with the loss of the entire African continent to drought and disease. Future generations of the poor and vulnerable will suffer far more than they otherwise would have.
We will be displacing suffering temporally and geographically. They will have lost biodiversity, up to half the species on the planet. Those things will never return, not in time spans relevant to our species. Some damages cannot be captured in dollar terms. Anyway, those are the arguments for a low-or-zero discount rate. Or at least some of the arguments. Sounds like time for an otter. What are the consequences?
Well, for one thing, renewable power immediately becomes cheaper than fossil-fuel power, including natural gas. In it, they argue that the U. In , as part of a rulemaking on efficiency standards, the U. The problems with the economic models the government used are twofold, say Johnson and Hope. The first, as you likely guessed, is about discount rates. The government instructed the task force to consider only three discount rates: 2.
Even the government agrees: The Office of Management and Budget has official guidelines [PDF] on the use of discount rates in inter-generational cost-benefit analysis. It says they can range from 1 to 3 percent.
0コメント