Monetary policy and long-term interest rates

Empirical 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 intere...

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Bibliographic Details
Published in:Journal of post Keynesian economics 2005-04, Vol.27 (3), p.533-539
Main Author: ATESOGLU, H. SONMEZ
Format: Article
Language:English
Subjects:
Causality
Central banks
cointegration
Cointegration analysis
Corporate bonds
Economic theory
Economics
Federal funding
Federal funds rate
Government relations
Interest rates
Long term
long-term interest rates
Monetary economics
Monetary policy
Monetary policy transmission mechanisms
Money supply
Post Keynesian economics
Post-Keynesianism
Studies
Treasury notes
U.S.A
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Summary:Empirical 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.
ISSN:0160-3477
1557-7821
DOI:10.1080/01603477.2005.11051451