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More on the monetary transmission mechanism: mortgage rates and the federal funds rate

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  • James E. Payne

Abstract

This study extends the research of Atesoglu (2003-4; 2004) with respect to the horizontalist and structuralist money supply endogeneity hypotheses to the case of fixed mortgage rates. The momentum threshold autoregressive model of Enders and Siklos (2001) reveals that the fixed mortgage rate and federal funds rate are cointegrated with incomplete interest rate pass-through and asymmetric adjustment. Specifically, the results of the asymmetric error correction model indicate unidirectional causality from the federal funds rate to the fixed mortgage rate, lending support for the horizontalist endogeneity hypothesis.

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Bibliographic Info

Article provided by M.E. Sharpe, Inc. in its journal Journal of Post Keynesian Economics.

Volume (Year): 29 (2007)
Issue (Month): 2 (January)
Pages: 247-257

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Handle: RePEc:mes:postke:v:29:y:2007:i:2:p:247-257

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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=109348

Related research

Keywords: cointegration; interest rate pass-through; threshold autoregressive models;

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Cited by:
  1. Valadkhani, Abbas, 2013. "The pricing behaviour of Australian banks and building societies in the residential mortgage market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 133-151.
  2. Valadkhani, Abbas & Bollen, Bernard, 2013. "An alternative approach to the modelling of interest rate pass through and asymmetric adjustment," Economics Letters, Elsevier, vol. 120(3), pages 491-494.
  3. Karagiannis, Stelios & Panagopoulos, Yannis & Vlamis, Prodromos, 2010. "Interest rate pass-through in Europe and the US: Monetary policy after the financial crisis," Journal of Policy Modeling, Elsevier, vol. 32(3), pages 323-338, May.

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