More on the monetary transmission mechanism: mortgage rates and the federal funds rate

摘要

This study extends the research of Atesoglu (2003-4; 2004) with respect to the horizontalist and structuralist money supply endogeneity hypotheses to the case of fixed mortgage rates. The momentum threshold autoregressive model of Enders and Siklos (2001) reveals that the fixed mortgage rate and federal funds rate are cointegrated with incomplete interest rate pass-through and asymmetric adjustment. Specifically, the results of the asymmetric error correction model indicate unidirectional causality from the federal funds rate to the fixed mortgage rate, lending support for the horizontalist endogeneity hypothesis.