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Monetary transmission---federal funds rate and CD rates

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  • Yasuo Nishiyama

Abstract

This paper investigates two different interpretations of the same empirical finding that long-term market rates Granger cause policy-controlled rates. Pollin (1991) interprets the finding in the usual manner (the structural position). Moore (1991) interprets the causality relationship in reverse (the accommodative position). This paper derives the term structure of CD rates. Then, using CD rates, it provides empirical evidence that appears consistent with Moore's interpretation. In addition, the causality relationship between long-term bond yields and the federal funds rate is examined. The results are consistent with the accommodative position under the assumption of the expectations theory of the term structure.

Suggested Citation

  • Yasuo Nishiyama, 2007. "Monetary transmission---federal funds rate and CD rates," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 29(3), pages 409-426.
    • Handle: RePEc:mes:postke:v:29:y:2007:i:3:p:409-426
    DOI: 10.2753/PKE0160-3477290303
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    Cited by:

    1. Giancarlo Bertocco & Andrea Kalajzic, 2014. "The liquidity preference theory: a critical analysis," Economics and Quantitative Methods qf1402, Department of Economics, University of Insubria.
    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. Giancarlo Bertocco, 2013. "Money as an Institution of Capitalism: Some Notes on a Monetary Theory of Uncertainty," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 42(1), pages 75-101, February.

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