scholarly journals Conventional Mortgage Interest Rate and The Effective Federal Funds Rate Pass-Through

1970 ◽  
Vol 34 (1) ◽  
pp. 57-74
Author(s):  
M.H. Tuttle ◽  
Natalie Hegwood
Keyword(s):  
Interest Rate ◽  
Federal Funds ◽  
Federal Funds Rate ◽  
Mortgage Interest ◽  
Long Run ◽  
Rate Adjustment ◽  
Mortgage Interest Rate ◽  
Short Run ◽  
One To One ◽  
Pass Through

This paper examines the response of the conventional thirty-year mortgageinterest rate to changes in the effective federal funds rate. The results indicatecomplete pass-through; in the long run, the conventional mortgage interest rateresponds in a one-to-one manner with the effective federal funds rate. Further,results suggest the conventional mortgage interest rate responds symmetrically tochanges in the effective federal funds rate in the long run. In the short run, large,frequent increases in the effective federal funds rate create larger increases in themortgage interest rate relative to periods where the federal funds rate is rising slowlyor falling. Our results suggest a long-run mortgage interest rate adjustment half-lifeof approximately twenty months in response to an effective federal funds ratechange.

scholarly journals Housing Price, Mortgage Interest Rate and Immigration

2020 ◽  
Vol 28 (3) ◽  
pp. 36-44
Author(s):  
Fennee Chong
Keyword(s):  
Interest Rate ◽  
Global Financial Crisis ◽  
Housing Prices ◽  
Housing Price ◽  
Mortgage Interest ◽  
Long Run ◽  
Mortgage Interest Rate ◽  
Short Run ◽  
The Global Financial Crisis ◽  
The Impact

AbstractHousing price in New Zealand has appreciated substantially after the Global Financial Crisis, resulting in an affordability problem for first home buyers. This paper studies whether changes in immigration activity and mortgage interest rate influence housing price. Empirical findings derived using VECM confirm the impact of immigration and mortgage interest rate on housing property price. Both variables explain 11.4 percent of the variation of Housing Index. An increase of 1 percent in mortgage interest rate would reduce the housing index movement by 1.44 percent whilst a 1 percent increase in immigrants would increase the housing index by 0.30 percent. In addition, about 2 percent of the short-run deviations of housing prices are adjusted towards the long-run equilibrium each month.

Symmetric and asymmetric adjustment of bank deposit interest rates: empirical evidence from Kenya

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moses Nzuki Nyangu ◽  
Freshia Wangari Waweru ◽  
Nyankomo Marwa
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Asymmetric Adjustment ◽  
Deposit Rate ◽  
Content Type ◽  
Long Run ◽  
Adjustment Speed ◽  
Short Run ◽  
Pass Through

PurposeThis paper examines the sluggish adjustment of deposit interest rate categories with response to policy rate changes in a developing economy.Design/methodology/approachSymmetric and asymmetric error correction models (ECMs) are employed to test the pass-through effect and adjustment speed of deposit rates when above or below their equilibrium levels.FindingsThe findings reveal an incomplete pass-through effect in both the short run and long run while mixed results of symmetric and asymmetric adjustment speed across the different deposit rate categories are observed. Collusive pricing arrangement behavior is supported by deposit rate categories that adjust more rigidly upwards than downwards, while negative customer reaction behavior is supported by deposit rate categories that adjust more rigidly downwards than upwards.Practical implicationsEven though the findings indicate an aspect of increased responsiveness over the period, the sluggish adjustment of deposit rates imply that monetary policy is still ineffective and not uniform across the different deposit rate categories.Originality/valueTo the best of the authors' knowledge, this is the first study to empirically examine both symmetric and asymmetric adjustment behavior of deposit interest rate categories in Kenya. The findings are key to policy makers as they provide insights on how long it takes to adjust different deposit rate categories to monetary policy decisions. In addition, the behavior of deposit rates partly explains why interest rates capping was imposed in Kenya in 2016.

scholarly journals The Ukrainian interest rate pass-through in the post-1999 era and the effectiveness of the countercyclical monetary policy

2019 ◽  
Vol 6 (2) ◽  
pp. 191-204
Author(s):  
Chu V. Nguyen ◽  
Anna Kravchuk
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Test Results ◽  
Sample Period ◽  
Long Run ◽  
Short Run ◽  
National Bank ◽  
Bounds Test ◽  
Pass Through

This study investigates the nature of the Ukraine interest rate pass-through from January 2000 to November 11, 2018-the post-1999 era. The empirical results reveal a relatively high short-run interest pass-through of 0.724100 and a marginally overshooting long-run interest rate pass-through of 1.054309. The bounds test results indicate a strong long-term relationship between countercyclical monetary policy and market rates. These empirical findings suggest that the National Bank of Ukraine has been very effective in formulating and implementing its countercyclical monetary policy, in spite of the pervasive corruption, formidable political and economic challenges faced by the Ukrainian Republic over this sample period, the results are quite surprising.

Interest-rate causality between the federal funds rate and long-run market interest rates

2019 ◽  
Vol 7 (3) ◽  
pp. 388-401
Author(s):  
Hongkil Kim
Keyword(s):  
Interest Rates ◽  
Causality Test ◽  
Federal Funds ◽  
Federal Funds Rate ◽  
Vector Error Correction ◽  
Long Run ◽  
Empirical Relations ◽  
Treasury Bond ◽  
Short Run ◽  
Error Correction Modeling

This paper investigates empirical relations between the federal funds rate/federal funds future rate and long-run market interest rates, employing a cointegration technique, vector error-correction modeling, and the Granger causality test developed by Toda and Yamamoto (1995). As a result, stable long-run relationships between the federal funds rate and Treasury bond rates are identified in the form of bidirectional causalities that are supportive of the Structuralist position, while the findings indicate unidirectional causalities from the federal funds rate to the Treasury bond rates in the short run. Empirical evidence in this paper also rejects the Horizontalist view that the expected future federal funds rate is relevant to current movements of the long-run interest rates, demonstrating Moore (1991) and his followers’ reverse interpretation on the causality from market rates to the federal funds rate to be inaccurate. An implication of such findings is that the current and the expected future federal funds rate do not have as much exogenous power on long-run market rates as claimed by Horizontalists, and the federal funds rate is, rather, endogenous to market rates for the 2004:2–2008:8 period.

scholarly journals Interest Rate Pass‐Through: Empirical Evidence from Pakistan

2013 ◽  
Vol 18 (1) ◽  
pp. 39-62
Author(s):  
Sheikh Khurram Fazal ◽  
Muhammad Abdus Salam
Keyword(s):  
Interest Rate ◽  
Error Correction ◽  
Impulse Response Function ◽  
Weighted Average ◽  
Lending Channel ◽  
Long Run ◽  
Error Correction Mechanism ◽  
Short Run ◽  
Pass Through ◽  
The Impact

This article empirically examines the interest rate pass‐through mechanism for Pakistan, using six‐month treasury bills as a proxy for the policy rate (the exogenous variable) and the weighted average lending rate and weighted average deposit rate as endogenous variables representing the lending and deposit channels, respectively. We use data for a six‐year period from June 2005 to May 2011, published by the central monetary authority in Pakistan. The widely accepted error correction mechanism is used to examine the short‐run and longrun pass‐through; a vector error correction mechanism impulse response function helps measure the short‐run speed of the pass‐through. We find that there is an incomplete pass‐through in Pakistan for both the lending and deposit channels. The impact is greater on the lending channel than on the deposit channel in both the short and long run, while the adjustment speed is higher for the lending channel.

scholarly journals INTEREST RATE PASS-THROUGH IN TURKEY AND IMPACT OF GLOBAL FINANCIAL CRISIS: ASYMMETRIC THRESHOLD COINTEGRATION ANALYSIS

2012 ◽  
Vol 14 (1) ◽  
pp. 98-113 ◽  
Author(s):  
Ebru Yüksel ◽  
Kıvılcım Metin Özcan
Keyword(s):  
Interest Rate ◽  
Financial Crisis ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Aggregate Demand ◽  
Cointegration Analysis ◽  
Threshold Cointegration ◽  
Long Run ◽  
Short Run ◽  
Pass Through

This paper aims to investigate the interest rate pass-through of monetary policy rate to banking retail rates in Turkey by employing the asymmetric threshold autoregressive (TAR) and momentum threshold autoegressive (MTAR) procedures introduced by Enders and Siklos (2001). Over the period December 2001 to April 2011, the empirical results of asymmetric threshold cointegration analysis suggest that there exist significant and complete pass-through between policy rate and loan rates. Positive and negative departures from the equilibrium converge to long run path almost at the same speed. Pace of convergence is about two to three months for all loan rates. Policy rate has significant short run impact on loan rates. Our analysis revealed that there is no significant relationship between policy rate and bank deposit rates due to sluggish adjustment of deposit rates. Lastly, the speed and behavior of interest rate pass-through between policy rate and loan rates did not change when we encounter the effect of 2008 financial crisis. Having a banking sector dominated financial system in Turkey, the results suggest that banks adjust loan rates faster than deposit rates. This indicates that Central Bank can affect the consumption behavior of people, in other words aggregate demand through loan rates.

scholarly journals Credibility of the Philippine Central Bank: Evidenced by the Interest Rate Pass-Through

2017 ◽  
Vol 3 (1) ◽  
pp. 47-56
Author(s):  
Chu V. Nguyen
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Central Bank ◽  
Empirical Finding ◽  
Policy Makers ◽  
Long Run ◽  
Short Run ◽  
Pass Through ◽  
The Interest Rate

This study investigates the Philippine interest rate pass-through over the December 2001 through January 2016 period. The empirical findings suggest that the Philippine Central Bank has not been very effective in formulating and implementing its countercyclical monetary policy. Specifically, the empirical results reveal very low short-run and long- run interest rate pass-through. The Bounds test results indicate no long-term relationship between countercyclical monetary policy and market rates. Notwithstanding the banking system's remarkable performance in the recent years, amid lingering uncertainties in global financial markets, the Philippine Central Bank lacked the credibility in conducting its countercyclical monetary policy. This empirical finding may not be desirable but it forewarns the monetary policy makers of challenges in formulating and implementing their monetary policy.

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