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Volatility in interest rates: its impact and management

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  • V. Shunmugam
  • Danish Hashim

Abstract

Volatility in interest rates has direct and indirect effects on the economy, particularly on businesses. Studies indicate that due to deregulation, following liberalization of economies, the interest rate volatility has surged worldwide, with India among the highest-volatility counties. Hedging in interest rate futures helps stabilize interest costs enabling businesses to remain competitive. Transparency of futures leads to increased lending at market determined rates, moderation of external shocks, better operating decisions, etc. India's maiden effort to start interest rate futures in 2003 failed due to certain inadequacies in product design. Here is an attempt to look at the need for and development of interest rate futures market in India.

Suggested Citation

  • V. Shunmugam & Danish Hashim, 2009. "Volatility in interest rates: its impact and management," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 2(2), pages 247-255.
    • Handle: RePEc:taf:macfem:v:2:y:2009:i:2:p:247-255
    DOI: 10.1080/17520840903076614
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    References listed on IDEAS

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    1. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1, March.
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    3. John A. Tatom, 1984. "Interest rate variability: its link to the variability of monetary growth and economic performance," Review, Federal Reserve Bank of St. Louis, vol. 66(Nov), pages 31-47.
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