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The interest rate sensitivity of Texas industry

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  • Lori L. Taylor
  • Mine K. Yücel

Abstract

A key factor in forecasting a region's growth is anticipating how a region will respond to changes in national policy. One important way national policy affects a region is through real interest rates. Forecasting regional growth, therefore, requires good estimates of the interest rate sensitivity of regional industries. In this study, Lori Taylor and Mine Yucel use vector autoregression analysis to examine the relationship between changes in real short-term interest rates and changes in Texas industry employment. They find that while a few industries are moderately sensitive to interest rate movements, most Texas industries are insensitive to changes in real interest rates. Moreover, they find that Texas total nonagricultural employment is insensitive to changes in real interest rates. As such, their analysis suggests that real interest rate movements influence the composition of Texas employment rather than its level.

Suggested Citation

  • Lori L. Taylor & Mine K. Yücel, 1996. "The interest rate sensitivity of Texas industry," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q II, pages 27-33.
    • Handle: RePEc:fip:fedder:y:1996:i:qii:p:27-33
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    References listed on IDEAS

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    1. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know about Unit Roots," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 141-220, National Bureau of Economic Research, Inc.
    2. Kloek, Tuen & van Dijk, Herman K, 1978. "Bayesian Estimates of Equation System Parameters: An Application of Integration by Monte Carlo," Econometrica, Econometric Society, vol. 46(1), pages 1-19, January.
    3. Gerald A. Carlino & Robert H. DeFina, 1996. "Does monetary policy have differential regional effects?," Business Review, Federal Reserve Bank of Philadelphia, issue Mar, pages 17-27.
    4. Franklin D. Berger & Keith R. Phillips, 1994. "Solving the mystery of the disappearing January blip in state employment data," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q II, pages 53-62.
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    Cited by:

    1. Juan Carlos Echeverry & Marcela Eslava M., 1997. "Notas sobre la Tasa de Interés y la Inflación en Colombia," Borradores de Economia 3280, Banco de la Republica.

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    Keywords

    Interest rates; Texas;

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