Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129977
Authors: 
Mendieta-Muñoz, Ivan
Year of Publication: 
2014
Series/Report no.: 
School of Economics Discussion Papers 1416
Abstract: 
This paper studies the empirical relationship between the Federal funds effective rate and the rate of profit or profit-to-capital ratio in the U.S. economy. The linkages between these two variables are studied: 1) at business-cycle frequencies using various filters and employing cross-correlation, regression and simulation analysis; and 2) using Vector Autoregressive models that unveil the dynamic interactions between the variables. The different empirical results reveal that positive shocks in the fed funds interest rate generate negative responses of the rate of profit, thus corroborating previous findings that show that a tight monetary policy is associated with lower aggregate profitability levels
Subjects: 
fed funds effective real rate
rate of profit
U.S. economy
aggregate profitability
JEL: 
E22
E40
E43
Document Type: 
Working Paper

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