Monetary policy and long-term interest rates
AbstractEmpirical relations between the federal funds rate and long-term interest rates are analyzed by employing the vector error correction modeling and cointegration techniques. The findings reveal a cointegration relation and a unidirectional causality from the federal funds rate to the long-term interest rates and are supportive of the horizontalist rather than the structuralist view of the money supply endogeneity. Findings also reveal that changes in the federal funds rate do not have much of an effect on the long-term interest rates in the short run. These results raise doubts concerning the effectiveness of monetary policy in the short run.
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Bibliographic InfoArticle provided by M.E. Sharpe, Inc. in its journal Journal of Post Keynesian Economics.
Volume (Year): 27 (2005)
Issue (Month): 3 (April)
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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=109348
cointegration; federal funds rate; long-term interest rates; monetary policy;
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- Jansen, Pieter W., 2006. "Did capital market convergence lower the effectiveness of the interest rate as a monetary policy tool?," Serie Research Memoranda 0010, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
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