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Monetary policy and long-term interest rates

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  • H. SONMEZ ATESOGLU

Abstract

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.

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  • H. Sonmez Atesoglu, 2005. "Monetary policy and long-term interest rates," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 27(3), pages 533-539.
    • Handle: RePEc:mes:postke:v:27:y:2005:i:3:p:533-539
    DOI: 10.1080/01603477.2005.11051451
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    Cited by:

    1. 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.
    2. Nahid Kalbasi Anaraki, 2021. "Federal Funds Rate Spillover to ECB Interest Rate: Are Macroeconomic Fundamentals Important?," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 9(1), pages 40-47.
    3. Levrero, Enrico Sergio & Deleidi, Matteo, 2019. "The causal relationship between short- and long-term interest rates: an empirical assessment of the United States," MPRA Paper 93608, University Library of Munich, Germany.

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