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Sub-zero interest rates boost investment, hiring – Mint

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4 years ago

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The coronavirus-led economic recession has once again sparked off a debate over how effective negative interest rates can be in stimulating demand. A new study by economists at Denmark’s central bank finds that the unusual monetary policy tool can encourage more investment and employment in an economy.

Denmark was the first country in the world to bring its key monetary policy interest rate to sub-zero levels and has kept it there for about 12 years now. In other words, the Danmarks Nationalbank started charging commercial banks to hold their cash. The idea of the policy was to discourage banks from holding excess reserves and instead invest more in the private sector.

As a result of this move, many Danish non-financial firms have faced negative interest rates on their bank deposits for several years.

Using microdata covering 45,000 Danish firms over the 2014–2018 period, Kim Abildgren and Andreas Kuchler find that companies with greater exposure to negative deposit rates tend to invest more in hiring as well in fixed capital such as machinery, buildings and commercial vehicles.

After two years of being charged to deposit in banks, an average firm increased its number of employees by about three percentage points more than a similar firm that did not face such negative deposit rates, the authors find.

Younger firms, which are typically smaller and in the growth phase, are more likely to respond to negative deposit rates by hiring more employees.

The investment ratio of firms facing negative interest rates is also about 0.5 percentage points higher on average. This is because such firms are more likely to re-evaluate their cash position and investment portfolios.

Also read: Firms facing negative deposit rates invest more and create more jobs

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S&P/TSX composite up more than 100 points, U.S. stock markets mixed

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3 weeks ago

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October 16, 2024

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TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

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The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

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October 11, 2024

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TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

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This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Economy

S&P/TSX composite little changed in late-morning trading, U.S. stock markets down

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October 10, 2024

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TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.

The S&P/TSX composite index was up 0.05 of a point at 24,224.95.

In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.

The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.

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The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.

This report by The Canadian Press was first published Oct. 10, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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