The federal funds rate effect on subprime mortgage crisis management: An ARDL approach

AboElsoud, M.E., Al Qudah, A., Paparas, D. and Bani-Mustafa, A. (2021) The federal funds rate effect on subprime mortgage crisis management: An ARDL approach. Journal of Governance and Regulation, 10 (2).

[img]
Preview
Text
Dimitrios Paparas The federal funds rate UPLOAD.pdf - Published Version
Available under License Creative Commons Attribution.

Download (1MB) | Preview

Abstract

This research empirically investigated the effectiveness of the interest rate policy of the Federal Reserve (Fed) on managing the subprime mortgage crisis. The study employed the autoregressive distributed lag model (ARDL) to analyze the stability of the Fed’s monetary policy, thereby providing an alternative analysis tool. Correlation analysis results showed a strong positive and statistically significant relationship between Fed funds rate and the labor market, a strong negative and statistically significant relationship between Fed funds rate and the housing market, and a strong negative and statistically significant relationship between Fed funds rate and price stability. In contrast, results of the ARDL model bounds test for cointegration indicated that house price index (HPI), labor market, and price stability were cointegrated, hence exhibiting a long-run relationship with Fed funds rate. This research demonstrates that additional empirical studies using new techniques are required to reevaluate the Fisher effect and expand the understanding of the mechanism between interest rates and inflation. This issue is extremely important, particularly for countries such as the U.S., the UK adapting inflation targeting policy using interest rates as an operational target.

Item Type: Article
Keywords: Subprime Mortgage Crisis, FED, Fed Fund Rate, Interest Rate Policy, Monetary Policy, ARDL
Divisions: Food, Land and Agribusiness Management
Depositing User: Mrs Rachael Harper
Date Deposited: 02 Jun 2021 13:28
Last Modified: 02 Jun 2021 13:28
URI: https://hau.repository.guildhe.ac.uk/id/eprint/17689

Actions (login required)

Edit Item Edit Item